EXHIBIT 99
COMMERCIAL NATIONAL FINANCIAL CORPORATION
AUDIT CHARTER
PURPOSE
The board of directors of Commercial National Financial Corporation and its
affiliates recognizes that a comprehensive internal control structure is an
important component of achieving the overall goals and objectives of the
organization. The board of directors has established the Audit Committee for the
purpose of governing and overseeing the design and implementation of the
internal control structure.
DEFINITION OF INTERNAL CONTROL
Internal control is defined as a process, affected by an entity's board of
directors, management, internal auditors, external auditors and other personnel,
designed to provide reasonable assurance regarding the achievement of the
following objectives:
- - effectiveness and efficiency of operations including the safeguarding
of assets,
- - reliability of financial reporting, and
- - compliance with applicable laws and regulations.
Effectiveness and Efficiency of Operations
Effectiveness and efficiency of operations includes:
- - The ability to monitor progress in achieving profitability and performance
goals. This includes the reporting processes used by management and the
board to make decisions.
- - Safeguarding of resources by ensuring that assets are protected from theft
and abuse, are properly recorded and fairly valued.
Reliability of Financial Reporting
The Audit Committee recognizes its fiduciary responsibility to shareholders,
depositors and loan customers; who rely on our financial information to make
informed decisions. The accounting practices used by management are to be
conservative and in compliance with GAAP and other regulatory guidance.
Financial reporting includes but is not limited to:
- - Press releases
- - Annual reports
- - Condensed interim reports
- - Regulatory reports filed with the SEC, FDIC, Federal Reserve and other
agencies
Compliance with Applicable Laws and Regulations
This objective covers all laws and regulations that management and the board of
directors must comply with including SEC rules, consumer protection laws, labor
laws etc. The goal is to avoid compliance failures that result in:
- - civil or criminal litigation,
- - adverse public relations,
- - loss of customer goodwill, or
- - other penalties that restrict management's ability to manage the
institution.
STRUCTURE AND RESPONSIBILITIES
Membership
The Audit Committee is to be comprised of a minimum of 5 members of the board of
directors. The Committee shall be appointed annually by a majority of the board
of directors.
The Committee shall be comprised of INDEPENDENT members of the board of
directors:
a) Management is excluded from membership on the Committee.
b) The Committee should exclude board members that act as a
consultant, advisor, promoter, or underwriter of the bank or any
of its affiliates
c) Members may not have any extensions of credit from the bank,
other than ordinarily offered to any other similar customer.
d) Members must comply with independent standards as defined by the
Security and Exchange Commission and the Nasdaq.
e) The Committee shall ANNUALLY assess the independence of each
member of the Committee.
The Committee members shall demonstrate competence and financial sophistication
regarding the financial reporting process. This includes:
f) attending internal and external training sessions,
g) possessing skills and expertise in related disciplines such as
accounting, finance, banking etc.
h) demonstrating the ability to understand fundamental financial
statements including balance sheet, income statement and
statement of cash flow.
Meetings
The Committee is expected to meet at least 4 TIMES PER YEAR. The Committee shall
elect a chairperson and a secretary.
The Committee shall have unrestricted access to internal and external auditors.
At each committee meeting, time will be reserved for the Committee to discuss
issues without management present. The Committee reserves the right to request
the presence of any other member of the board of directors, member of
management, employees or third party advisor.
The Committee shall keep minutes of all activities and report their activities
to the board of directors.
Responsibilities
1) Oversee Financial Reporting and Disclosure
2) Financial Statements and Disclosures - The Committee shall read
the Corporation's periodic and annual filings with the SEC and
consider whether they accurately reflect the financial condition
of Commercial National Financial Corporation and its results of
operations.
3) Disclosure of Transactions Involving Management and Principal
Stockholders - The Committee shall determine that management has
established procedures to report to the SEC, within two (2)
business days, changes in Commercial National Financial
Corporation stockholdings by directors, officers, and more than
10% stockholders of the Corporation. Also, the Committee shall
determine that management has put in place procedures to report
to the SEC, within ten (10) business days, for any new directors,
officers or 10% stockholders of the Corporation.
4) Management Certification of Financial Statements and Disclosures,
and Assessment of Internal Controls - The Committee shall ensure
that management has established adequate procedures to ensure
that quarterly and annual
financial statements and disclosures are accurate and complete.
This will include reviewing and approving the quarterly and
annual CEO and CFO certifications.
5) Disclosure of Code of Business Conduct and Ethics - The Committee
shall determine that management has complied with requirements of
the SEC to disclose in periodic reports whether or not Commercial
National Financial Corporation has established a Code of Ethics.
6) Disclosure of Audit Committee Approval of Non-Audit Services -
The Committee shall determine that management has complied with
requirements of the SEC to disclose the approval by the Committee
of all non-audit services to be performed by the Corporation's
independent external auditor.
- The Committee shall review significant accounting policies,
accounting estimates, and new accounting rules.
7) Selection of Internal and External Auditors.
- The Committee should consider competency, independence, scope of
testing and the budget.
- Internal and external audit functions shall report directly to
the Audit Committee.
- All reports, responses and other correspondence shall be directed
to the Committee.
8) Assess the Independence of the External and Internal Auditors
Annually.
- Recommend the appointment and/or discharge of the independent
external auditor;
- Pre-approve the external auditors fees;
- Evaluate the external auditors independence; and
- Pre-approve all permissible non-audit services and fees to be
provided by the external auditors.
9) Annually Approve the Internal and External Audit Plans
a) establishing the scope of work performed by the internal and
external auditors as required by the annual audit in conjunction
with the bank's management, internal auditor, and independent
public accountant,
10) Supervise Internal Audit Function
- Review with management the results of the independent external
auditor's quarterly financial statements reviews;
- Review with management and the independent external auditor the
results of the annual financial statements audit;
- Review with management and the independent external auditor their
assessment of the quality of the Corporation's accounting
principles, the adequacy of internal accounting and disclosure
controls and resolution of identified significant deficiencies or
material weaknesses and reportable conditions in internal
accounting and disclosure controls;
- Review compliance with laws and regulations and other audit
reports deemed significant by the Committee;
- Receive certain communications from the independent external
auditors on an annual basis which include required communications
under generally accepted auditing standards; and
- Based on this review, the Committee shall make its recommendation
to the Board as to the inclusion of the audited consolidated
financial statements in the Corporation's annual report on Form
10-K.
11) Fraud Reporting and Handling of Complaints
The Committee shall establish procedures for:
- the receipt, retention, and treatment of complaints received by
the corporation regarding accounting, internal controls,
regulatory matters or other audit matters, and
- the confidential, anonymous submission by employees of Commercial
National Financial Corporation and its subsidiaries regarding
questionable accounting or auditing matters.
12) Report to the Board of Directors
The Committee shall report the results of all audits the board of
directors as soon as practical after each Committee meeting.
13) Communication to Shareholders
- The Committee shall report activities in an annual report to be
included in Commercial National Financial Corporation's proxy
statement.
- The Committee should file a copy of the audit charter with the
SEC every three years and after any amendments.
- The Committee shall disclose annually the name and number of
persons determined to be Committee financial experts, or explain
why it does not have one. It must also indicate whether the
financial experts are independent of management,
Authority
In order to properly discharge it's duties, the Audit Committee, has the
authority to:
- engage third party advisors including legal counsel, auditors, or
other advisors as it deems necessary,
- meet with the Corporation's general in-house legal counsel when
appropriate,
- establish the appropriate funding needed to compensate the
external and internal auditors and any advisor employed by the
Committee, and
- register for seminars, presentations and other educational
opportunities as deemed appropriate by the Committee.