Audit Committee Charter
The Audit Committee and SB Financial Group Board of Directors approved this charter on October 20, 2010.
The purpose of the Audit Committee is to assist the Board of Directors:
- In its oversight of the accounting and financial reporting principles and policies and the internal accounting and disclosure controls and procedures of SB Financial Group and its subsidiaries (collectively, the “Corporation”);
- In its oversight and supervision of the Corporation’s internal audit function;
- In its oversight of the certification of the Corporation’s quarterly and annual financial statements and disclosures and assessment of internal disclosure controls by the Corporation’s Chief Executive Officer and Chief Financial Officer;
- In its oversight of the Corporation’s consolidated financial statements and the independent external audit thereof; and
- In evaluating the independence of the internal and independent auditors.
The Audit Committee shall be directly responsible for the appointment, compensation, retention and oversight of the work of any independent auditor engaged for the purpose of preparing or issuing an audit report or performing other audit, review or attestation services for the Corporation, and the independent auditor must report directly to the Audit Committee.
The management of the Corporation is responsible for the preparation, presentation and integrity of the Corporation’s consolidated financial statements. Management is responsible for maintaining appropriate accounting and financial reporting principles and policies and internal accounting standards in accordance with applicable laws and regulations.
The independent auditors are responsible for planning and carrying out a proper audit of the Corporation’s annual consolidated financial statements, reviews of the Corporation’s quarterly consolidated financial statements prior to the filing of each quarterly report on Form 10-Q, and other procedures.
The Audit Committee shall pre-approve all audit and permitted non-audit services proposed to be provided by the Corporation’s independent auditors in compliance with Section 202 of the Sarbanes-Oxley Act of 2002 and the rules and regulations promulgated thereunder. The independent auditors shall submit to the Audit Committee annually a formal written statement delineating all relationships between the independent auditors and the Corporation (“Statement as to Independence”), addressing each non-audit service provided to the Corporation. The Audit Committee shall be responsible for considering whether any services provided by the independent auditor would cause the independent auditor to not be independent of the Corporation.
The members of the Audit Committee shall serve at the pleasure of the Board of Directors. The Audit Committee shall be comprised of at least three members of the Board of Directors. Each member of the Audit Committee shall be free of any relationship that, in the opinion of the Board of Directors, may interfere with the exercise of his or her independent judgment in carrying out his or her responsibilities as a director of the Corporation. All Audit Committee members must satisfy the independence requirements prescribed by applicable rules of NASDAQ as well as Section 10A of the Securities Exchange Act of 1934 and the rules promulgated by the Securities and Exchange Commission (“SEC”) thereunder.
Each member of the Audit Committee must be able to read and understand financial statements, including the Corporation’s balance sheet, income statement and cash flow statement. Additionally, at least one member of the Audit Committee must be an “audit committee financial expert” as defined in the applicable rules or criteria established by the SEC and NASDAQ and as determined by the Audit Committee.
Frequency of Meetings:
The Audit Committee shall meet at least four times annually and may convene more frequently if the Audit Committee determines that circumstances dictate additional meetings. All Audit Committee members are expected to attend each meeting in person or via conference call or other means of appropriate electronic communication.
The Audit Committee shall meet with management, the internal auditor and the independent auditor in separate executive sessions to discuss any matters that the Audit Committee or any one of these persons or groups 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 auditors to attend a meeting of the Audit Committee or to meet with any members of, or consultants to, the Audit Committee, as the Audit Committee deems necessary or desirable to provide the information the Audit Committee needs to carry out its duties and responsibilities.
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.
The Audit Committee shall carry out the following duties and responsibilities:
- To provide avenues of communication among the internal auditor, the accounting firm engaged to provide internal audit services, the independent auditor and the Board of Directors.
- To report Audit Committee actions to the full Board of Directors and make appropriate recommendations.
- The Audit Committee shall have the authority to engage independent legal counsel, auditors and other advisors for special audits, reviews and other procedures as it deems necessary to carry out its duties.
- The Audit Committee may take any other action as may be required from time to time by applicable laws and regulations, the Corporation’s Articles and Code of Regulations or the Board of Directors.
- The Internal Audit Plan (schedule) will be presented to the Committee for review and approval on an annual basis. Subsequent Internal Audit Plan revisions will also be brought to the Committee for review and approval and documented in the minutes as such.
Responsibilities for Engaging Independent Auditors and Appointing the Internal Auditor
- The Audit Committee shall be directly responsible for the appointment, compensation, retention and oversight of the work of the independent auditor (including the resolution of disagreements between management and the independent auditors), and the independent auditor must report directly to the Audit Committee.
- The Audit Committee shall pre-approve the audit engagement, including fees and terms, and all other audit or permitted non-audit services performed by the Corporation’s independent auditor. The Audit Committee shall also evaluate the independent auditor’s independence. The pre-approval of audit and non-audit services and fees of the independent auditor may be documented by a member of the Audit Committee signing annual or periodic engagement letters that define in general terms the type of services to be provided and the range of fees that are considered acceptable for such services, or as otherwise documented in the minutes of the Audit Committee meetings. The actual compensation paid to the independent auditor, for all such pre-approved services and fees, is to be reported to the Audit Committee by management on at least a quarterly basis.
- Ascertain that the lead (or concurring) audit partner from the independent audit firm performing audit services, serves in that capacity for no more than five fiscal years of the company. In addition, ascertain that any partner other than the lead or concurring partner serves no more than seven years at the partner level on the company’s audit.
- To review and approve the appointment, replacement, reassignment or dismissal of the internal auditor and the accounting firm performing the internal audit services. To review and approve audit related fees paid to the accounting firm performing the internal audit services.
- The Audit Committee will assess and assure the independence of the internal auditor and the accounting firm engaged to provide the internal audit services, including a review of management consulting services provided to the Corporation by the independent auditor and the fees paid for them.
- The Audit Committee will consider, in consultation with the independent auditor and the internal auditor, the audit scope and procedural plans made by the internal auditors and the independent auditor.
- The Audit Committee will listen to management and the independent auditor if either thinks there might be a need to engage additional auditors. The Audit Committee will decide whether to engage an additional firm and, if so which one.
- The Audit Committee will make sure that the internal auditor and the independent auditor coordinate the internal and external audits. The purpose of coordinating these efforts is to assure completeness of coverage, reduce redundancy and use audit resources effectively.
Responsibilities for Reviewing Internal Audits, the Annual External Audit and the Review of Quarterly and Annual Financial Statements
- The Audit Committee will take measures to assure that the independent auditor (a) views the Board of Directors as its client, (b) will be available to the full Board of Directors and (c) will provide the Audit Committee with a timely analysis of significant financial reporting issues.
- The Audit Committee will question management, the internal auditor and the independent auditor about significant risks and exposures and assess management’s steps to minimize them. The Audit Committee may request detailed reports from management, the independent auditor, or the internal auditor related to significant matters affecting the financial reporting process, internal controls or other areas of special interest or concern.
- The Audit Committee will review the following with the independent auditor and the internal auditor:
- The adequacy of the Corporation’s internal controls, including computerized information system controls and security.
- Any significant findings and recommendations made by the independent auditor or the internal auditing function, together with management’s responses to them.
- Shortly after the annual independent audit is completed, the Audit Committee will to review the following with management and the independent auditor:
- The Corporation’s annual financial statements and related footnotes.
- The independent auditor’s audit of and report on the financial statements.
- The independent auditor’s qualitative judgments regarding the appropriateness of accounting principles and financial disclosures and their evaluation of the degree of aggressiveness/conservatism of the accounting principles and underlying estimates.
- Any serious difficulties or disputes with management encountered during the course of the audit.
- The independent auditor’s “management letter” regarding:
- Recommendations for improvements in internal control and its operation.
- An update on new accounting pronouncements.
- The independent auditor’s “SAS 61 Letter” regarding required communications with the Audit Committee.
- The Audit Committee will consider and review with management and the internal auditor:
- Any significant internal audit findings and recommendations during the year and management’s responses to them.
- Any difficulties encountered in the internal auditing process, including any restrictions on the scope of work or access to required information.
- Any changes to the planned scope of the internal audit plan that the Audit Committee thinks advisable.
- The internal auditing department’s budget and staffing.
- The Audit Committee will consider and review with management any regulatory agency examination reports and management’s responses, including:
- Safety and Soundness examinations
- Compliance and CRA examinations
- The Audit Committee will review annual filings with the SEC and other documents made available to the public containing the Corporation’s financial statements and will consider whether such information is consistent with the information in the financial statements.
- The Audit Committee will review interim financial statements and reports with management, the independent auditor and the internal auditor prior to their official release to the public or filing with the SEC or other regulators.
- The Audit Committee will review this Charter annually and update this Charter as necessary.
- The Audit Committee will review policies and procedures covering officers’ expense accounts and perquisites, including their use of corporate assets, and consider the results of any review of those areas by the internal auditor or the independent auditor.
- The Audit Committee shall have the responsibility for establishing procedures for the receipt, retention and treatment of complaints received by the Corporation regarding accounting, internal accounting controls or auditing matters, including the confidential, anonymous submission by employees of the Corporation of concerns regarding questionable accounting or auditing matters. The Audit Committee shall also establish procedures to ensure that no retaliation will be allowed to occur against anyone who reports potential fraud or a complaint in good faith.
- The Audit Committee will review legal and regulatory matters that may have a material effect on the Corporation’s financial statements, compliance policies and programs and reports from regulators.
- The Audit Committee will meet with the internal auditor, the accounting firm performing the internal audit services, the independent auditor and management in separate executive sessions to discuss any matters the Audit Committee or these groups believe should be discussed privately with the Audit Committee.
- The Audit Committee will approve any waivers from the Corporation’s Code of Business Conduct and Ethics for directors and executive officers.
- The Audit Committee will assess the performance of the Audit Manager and internal audit department to ensure that they are appropriate agents of the audit committee in the organization.
- The Audit Committee should conduct a self-evaluation on an annual basis.
The Corporation shall provide the Audit Committee with appropriate funding, as determined by the Audit Committee; for payment of:
- Compensation to any independent auditors engaged for the purpose of preparing or issuing an audit report or performing other audit, review or attestation services for the Corporation;
- Compensation to any advisors employed by the Audit Committee; and
- Ordinary administrative expenses of the Audit Committee that are necessary or appropriate in carrying out its responsibilities.
Compensation Committee Charter
The Compensation Committee approved its charter on July 21, 2004. The Committee revised and approved the charter on February 18, 2009. The SB Financial Group Board of Directors approved this charter on April 15, 2009.
Purpose & Oversight:
The Compensation Committee (the “Committee”) shall discharge the responsibilities assigned to it by the Board of Directors of the Company relating to the compensation and benefits awarded to directors and “officers” (as defined in Section 16 of the Securities Exchange Act and the Act’s implementing regulations) of the Company and selected “senior executives.”
In discharging its duties, the Committee seeks to balance the interests of the Company and its stakeholders with those of the executive officers and directors. The Committee shall develop, implement, and maintain compensation plans and programs that help the Company to attract, retain, and reward competent and productive executives and directors, in support of fulfilling the Company’s business purpose and meeting shareholder needs.
The Committee is responsible for producing an annual report on senior executive compensation for inclusion in the Company’s proxy statement, as required. The Corporate Secretary shall make copies of this Charter available to any shareholder upon written request of the Company.
The Committee shall be comprised of at least three (3) directors who are independent of management and the Company. Members of the Committee shall meet the independence and qualification requirements of any applicable federal securities laws and regulations of the Securities and Exchange Commission (“SEC”) and relevant stock markets.
Individuals selected to serve on the Compensation Committee, and the Committee Chair, shall be determined by the Chairman of the Governance Committee, and all members shall be appointed annually. Committee members may be replaced by the Board.
Independent executive compensation advisory services may be retained by the Committee to assist in the development of peer group data, making recommendations to address inequities in programs, and drafting supporting executive compensation plans. Legal counsel or other accounting or tax advisors may also be retained to advise the Committee on legal, regulatory, and reporting/disclosure matters. Outside compensation consultants, legal counsel, and other advisors shall report to the Committee and the Committee shall have hiring and firing authority for these advisors.
Frequency of Meetings:
The Compensation Committee will meet as required, but not less than annually, quorum three voting members.
Authority & Responsibilities:
- The Committee shall annually review and approve corporate and individual goals and objectives pertaining to CEO compensation, assess the CEO’s performance against these goals and objectives, and report to the Board the level of CEO compensation based on this assessment. The elements of CEO compensation to be considered may include base salary, supplemental benefits, perquisites, and incentive/at-risk compensation (cash and/or equity awards). In performing this assessment, the Committee may consider the Company’s performance and relative shareholder return, the value of CEO compensation at comparable companies, market considerations, and such additional information as the Committee deems pertinent.
- The Committee shall annually review, approve, and report to the Board the compensation levels of “officers” (as defined in Section 16 of the Securities Exchange Act and the Act’s implementing regulations) of the Company and selected “senior executives.” The elements of compensation to be considered may include base salary, supplemental benefits, perquisites, and incentive/at-risk compensation (cash and/or equity awards).
- The Committee shall periodically review, approve, and report if and when appropriate, regarding any employment agreements, severance agreements, management continuity or change in control agreements, or any other supplemental agreements that may be in existence or contemplated with any officer or executive of the Company or subsidiary of the Company.
- The Committee shall annually review and report to the Board the compensation levels of directors. The elements of compensation to be considered may include retainer fees, Board fees, committee fees, fees for chairing the Board or committees, equity awards, or other supplemental director benefits.
- The Committee shall maintain an awareness of/approve, and report thereto with regard to any incentive/at-risk compensation program utilized by the Company or a subsidiary of the Company.
- The Committee shall routinely review market comparisons of compensation every two years, or more frequently as circumstances dictate.
- The Committee shall assume responsibility for developing, recommending to the Board, maintaining, measuring, and reporting on all “compensation-related” plans, e.g., supplemental benefits plans, incentive/at-risk compensation plans, stock plans, and others that may be contemplated and implemented.
- The CEO will meet with the Committee on a regular basis to review information, make recommendations, and provide other input. However, he/she will not be a voting member of the Committee nor will the CEO have any authority in the decision making process of the Committee.
- The Committee shall adhere to the “reasonable person test” in all matters coming before the group, allowing all members to vote “no” on matters that do not seem appropriate or are too complicated to be easily justified. The Committee shall allow a designated time in each meeting agenda for an “executive session.”
- The Committee shall serve as the central point for review of all required proxy and related disclosures pertaining to executive and director compensation, including the Compensation Discussion & Analysis, principle-based disclosure, termination scenarios, and tabular disclosures.
- The Committee shall meet at least annually or more frequently as responsibilities and issues dictate. The Committee shall document and submit the minutes of all meetings of the Committee to the Board of Directors.
- The Committee shall obtain the Board’s approval of this Charter and review and reassess the Charter, the performance of the Committee, and the Committee’s roles and responsibilities as appropriate.
Governance and Nominating Committee Charter
The Governance and Nominating Committee approved this charter on October 15, 2008. The SB Financial Group Board of Directors approved this charter on November 16, 2011.
The primary function of the Governance and Nominating Committee (the “Committee”) is to assist the Board of Directors of SB Financial Group (“SBFG”) and its subsidiary boards (“Boards”) in identifying qualified individuals to become directors, determining the composition of the Boards and their committees, monitoring a process to assess Board effectiveness and developing and implementing SBFG's corporate governance guidelines.
Independent Director as elected by the Committee.
The Committee will consist of three to five independent members of the SBFG Board, appointed by the full SBFG Board, and will include a member of the Audit Committee. Each member of the Committee will meet the independence requirements of the Nasdaq Stock Market.
Frequency of Meetings:
The Committee will meet as required, but not less than semi-annually, with a quorum being three voting members. Independent directors who are not members of the Committee may attend meetings of the Committee but may not vote. All other persons attending meetings of the Committee will be by invitation.
- Review the charter of the Committee and recommend appropriate changes.
- Meet, deliberate, and recommend to the full SBFG Board in a regular or specially called session the following actions:
- Select or recommend for election nominees for each Board
- Recommend appointment and removal of executive officers
- Recommend removal of directors
- Select or recommend appointment of replacement directors
- Recommend establishment of new committees of the Board
- Recommend appointment of Board members to committees
- Perform an annual evaluation of the Committee’s performance for submission to the full SBFG Board.
- Establish and review the Boards’ committee structures and make any appropriate recommendation to the Boards. The Committee shall also review the adequacy of the charters of all committees of the SBFG Board. [Note-Audit committee will need to approve its own charter].
- Recommend to the SBFG Board for its approval, directors to serve as members of each SBFG Board committee. The Committee shall also recommend the chairman for each SBFG Board committee, but such decision shall be reserved for the committee Members of each respective committee.
- Evaluate, annually, the performance of current members of the SBFG Board and make recommendations to the SBFG Board regarding the appropriateness of members of the Board standing for reelection. The evaluation shall consider, among other issues: (a) the adequacy of each Board member’s preparation for Board and committee meetings; (b) attendance record for Board and committee meetings; (c) participation in discussion as evidenced by questions, suggestions and comments reflecting understanding of the issues under discussion; (d) willingness to provide advice and counsel to executive management, when appropriate; (e) advocacy of SBFG’s interests in the community, and (f) commitment to the principles of the Code of Conduct and Ethics.
- Lead the search for individuals qualified to become members of the various Boards and select, or recommend, director nominees for the Boards. The Committee shall select individuals as director nominees who 1) have the highest personal and professional integrity, 2) have demonstrated exceptional ability and judgment, 3) shall be most effective, in conjunction with the other members of the board, collectively serving the long-term interests of the shareholders, 4) have the ability to devote the necessary time to service as a Director and 5) have a working knowledge of financial statements and a sense of proper corporate governance.
- The Committee shall consider director candidates recommended by security holders (shareholders). The decision of whether a candidate recommended by shareholders shall be selected or recommended by the Committee for nomination to stand for election as a director shall be within the sole discretion of the Committee. For consideration for the Annual Meeting of Shareholders, a written submission must delivered to the Chairman of the Board of SBFG, the Chairman of the Governance and Nominating Committee, the CEO of SBFG or the Investor Relations Officer no later than June 30, of the preceding year. Such submissions must be in writing and state the qualifications of the proposed candidate. The committee will consider such candidate as it would any other candidate. This Paragraph 8 provides a mechanism for shareholders to recommend Board candidates for consideration by the Committee. This Paragraph 8 does not address the required procedures whereby shareholders may nominate persons to stand for election to the SBFG Board which are included in Section 2.03 of SBFG’s Amended and Restated Code of Regulations. This Paragraph 8 of this Charter does not change, alter or amend in any manner the requirements of Section 2.03 of the Amended and Restated Code of Regulations of SBFG.
- Select or recommend candidates for election to the SBFG Board in the event a vacancy occurs between annual shareholders’ meetings.
- Review and recommend to the Boards policies establishing director stock ownership requirements.
- Monitor the education and ongoing management development of directors.
- Review and approve any transaction (“Related Party Transaction”) between SBFG and any director, or officer of SBFG or members of their immediate family or entities with which they are affiliated.
- Consider matters of social responsibility and matters of significance related to public affairs and the SBFG’s employees and stockholders.
- The Committee may retain any search firm to assist in identifying director candidates and may retain outside counsel and any other advisors the Committee may deem appropriate in its sole discretion. The Committee shall have sole authority to approve related fees and retention terms.
- Solicit and receive comments from each member of the Boards, at least annually, evaluating the performance and effectiveness of the Boards and make recommendations for steps to improve the performance and effectiveness of the Boards. The Committee shall summarize and review the evaluations with the Boards and shall recommend to the Boards that appropriate steps for improvement be implemented.
- Report the actions and recommendations of the Committee to the SBFG Board after each Committee meeting and conduct and present to the SBFG Board an annual performance evaluation of the Committee. The Committee shall review at least annually the adequacy of this charter and recommend any proposed changes to the SBFG Board for approval.
- Maintain minutes of the deliberations of the Committee. Copies of the minutes shall be made available to any and all members of the SBFG Board.
- Developing and recommending to the SBFG Board for approval, and then periodically reviewing and assessing the adequacy of, corporate governance guidelines and principles and recommending any proposed changes to the SBFG Board for approval. Reviewing and assessing SBFG’s compliance with Securities and Exchange Commission and Nasdaq rules and other legal and regulatory requirements pertaining to corporate governance.
Director's Loan Review Committee Charter
The SB Financial Group Board of Directors originally approved this charter on February 19, 2003. The Director's Loan Review Committee reviewed and approved this charter on September 11, 2012.
The primary function of the Director's Loan Review Committee is to assist the board of directors in fulfilling its oversight responsibilities of credit quality in subsidiary banks. The secondary function of the Director's Loan Review Committee is to oversee management of the SBFG Loan Policy Manual.
Two or more independent outside directors who are not involved in loan approval at subsidiary banks. The State Bank President and Senior Lender participate as non-voting members.
Frequency of Meetings:
The Committee will meet quarterly, on a regularly scheduled basis, and at such other times as may be requested by a committee member, management or the company's internal loan review manager. The Directors Loan Review Committee designates an internal loan review manager to perform independent internal loan reviews.
- To provide avenues of communication among the SBT Senior Lender and SBT Loan Review Manager and the board of directors.
- To settle disputes on recommended loan grade changes between Loan Review and Management.
- To review and approve suggestions for additions, deletions and/or changes to the SBFG Loan Policy as recommended by the Bank's Credit Policy Committee.
- To report committee actions to the board of directors and to make appropriate recommendations.
Responsibilities for appointing and supervising the internal loan review manager
- To determine the scope of the internal loan review and its frequency, which shall be at least annually.
- To review and approve the appointment, replacement, reassignment or dismissal of the SB Loan Review Manager, and to conduct periodic performance appraisals and set compensation.
- To review and approve the annual plan of the SB Loan Review Manager to fulfill his/her duties.
Responsibilities for reviewing reports of the internal loan review manager
- To review on a quarterly basis the individual loan review reports prepared by the internal loan review officer and to report to the company's and banks' boards of directors as to loans reviewed, changes in assigned risk weights and changes as to specific reserve allocations, as appropriate.
- To review periodic reports of examination provided by bank regulatory agencies with regard to the evaluation of all aspects of the subsidiary banks' lending processes. To report to the company and banks' boards of directors as to comparisons of internal and external loan review and examination results.
- To review this charter at least annually with a view toward coordinating and balancing the activities of the internal loan review manager. The goal is to achieve a high degree of comfort with the risk weighting system and the adequacy of the loan review program.
The Annual Proxy statement shall disclose that these Charters are available on the Website and will include the SBFG Website address.