CHARTER OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
The purpose of the Audit Committee (the "Committee") of the Board of Directors (the "Board") of CrossFirst Bankshares, Inc. (the "Company") is to oversee the Company's accounting and financial reporting processes, internal controls and the audits of the Company's financial statements. This includes the internal controls over financial and regulatory reporting of the Company, the audits and financial statements of the Company and the performance, independence and qualifications of the independent auditor and internal auditors of the Company.
II. STRUCTURE AND MEMBERSHIP
1. Members. The Committee shall consist of at least three members of the Board, as determined from time to time by the Board.
2. Independence. Each member of the Committee shall: (a) be an "independent director" as defined by applicable rules of the Nasdaq Stock Market, except as may otherwise be permitted by such rules; (b) meet the criteria for independence set forth in Rule 10A-3(b)(1) under the Securities Exchange Act of 1934, as amended (the "Exchange Act") (subject to the exemptions provided in Rule 10A-3(c) under the Exchange Act); (c) not have participated in the preparation of the financial statements of the Company or any current subsidiary of the Company at any time during the past three years; and (d) comply with the requirements of 12 C.F.R. Part 363, as applicable, and meet any other requirements imposed by applicable laws, rules and regulations.
3. Financial Literacy. Each member of the Committee must be able to read and understand fundamental financial statements, including the Company's balance sheet, income statement, and cash flow statement. In addition, at least one member must have past employment experience in finance or accounting, requisite professional certification in accounting, or any other comparable experience or background that results in the individual's financial sophistication, including being or having been a chief executive officer, chief financial officer, or other senior officer with financial oversight responsibilities. At least one member of the Committee shall be an "audit committee financial expert" (as defined by applicable rules of the Securities and Exchange Commission ("SEC")), and at least two members of the Committee shall have banking or related financial management expertise as required by 12 C.F.R. Part 363.
4. Chair. The Board shall designate the Chair of the Committee.
5. Compensation. The compensation of Committee members shall be as determined by the Board. No member of the Committee may receive, directly or indirectly, any consulting, advisory, or other compensatory fee from the Company or any of its subsidiaries, other than fees paid in his or her capacity as a member of the Board or of a committee of the Board.
6. Appointment and Removal. The Company's Bylaws shall govern the processes and procedures for the appointment and removal of members of the Committee; provided, that the Corporate Governance and Nominating Committee shall make recommendations to the Board regarding the persons to be appointed as members of the Committee by the Board.
III. AUTHORITY AND RESPONSIBILITIES
The Committee shall discharge its responsibilities and shall assess the information provided by the Company's management and the Company's Independent Auditor (defined below), in accordance with its business judgment. Management is responsible for the preparation, presentation, and integrity of the Company's financial statements, for the appropriateness of the accounting principles and reporting policies that are used by the Company, and for establishing and maintaining adequate internal control over financial reporting. The Independent Auditor is responsible for auditing the Company's financial statements and, when required, the Company's internal control over financial reporting, and for reviewing the Company's unaudited interim financial statements. The authority and responsibilities set forth in this Charter do not reflect or create any duty or obligation of the Committee to plan or conduct any audit, to determine or certify that the Company's financial statements are complete, accurate, fairly presented, or in accordance with generally accepted accounting principles or applicable law, or to guarantee the Independent Auditor's reports.
Oversight of Independent Auditor
1. Selection.The Committee shall be solely and directly responsible for appointing, evaluating, retaining, and, when necessary, terminating the engagement of any independent registered public accounting firm engaged for the purpose of preparing or issuing an audit report or performing other audit, review or attest services for the Company (the "Independent Auditor"). The Committee may, in its discretion, seek stockholder ratification of the Independent Auditor it appoints. Engagement letters executed with the Independent Auditor will comply with the requirements of 12 C.F.R. Part 363, as applicable.
2. Independence. The Committee shall oversee the independence of the Independent Auditor. In connection with this responsibility, the Committee shall obtain and review the written disclosures and the letter from the Independent Auditor that is required by applicable requirements of the Public Company Accounting Oversight Board ("PCAOB") regarding the Independent Auditor's communications with the Committee concerning independence. The Committee shall actively engage in dialogue with the Independent Auditor concerning any disclosed relationships or services that might impact the objectivity and independence of the Independent Auditor.
3. Compensation. The Committee shall have sole and direct responsibility for setting the compensation of the Independent Auditor. The Committee is empowered, without further action by the Board, to cause the Company to pay the compensation of the Independent Auditor established by the Committee.
4. Preapproval of Services. The Committee shall preapprove all audit services to be provided to the Company, whether provided by the principal Independent Auditor or other firms, and all other services (review, attest and non-audit) to be provided to the Company by the Independent Auditor; provided, however, that de minimis non-audit services may instead be approved in accordance with applicable SEC rules. The Audit Committee may establish policies and procedures for the Audit Committee's pre-approval of permitted services by the Independent Auditor on an on-going basis, including delegating to one or more members of the Audit Committee the authority to pre-approve permitted services, as long as any such preapproval of services is presented to the full Audit Committee at its next scheduled meeting.
5. Oversight. The Independent Auditor shall report directly to the Committee, and the Committee shall have sole and direct responsibility for overseeing the work of the Independent Auditor, including resolution of disagreements between Company management and the Independent Auditor regarding financial reporting. In connection with its oversight role, the Committee shall, from time to time as appropriate, receive and consider the reports and other communications required to be made by the Independent Auditor regarding:
- critical accounting policies and practices;
- alternative treatments within generally accepted accounting principles for policies and practices related to material items that have been discussed with Company management, including ramifications of the use of such alternative disclosures and treatments, and the treatment preferred by the Independent Auditor;
- other material written communications between the Independent Auditor and Company management; and
- all other matters required to be communicated by or discussed with the Independent Auditor under the applicable standards of the PCAOB, the rules of the SEC and other applicable laws and regulations.
6. Quality-Control Report. At least annually, the Committee shall obtain and review a report by the Independent Auditor describing:
- the firm's internal quality-control procedures: and
- • any material issues raised by the most recent internal quality-control review, peer review, or PCAOB inspection 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, and any steps taken to deal with any such issues.
Financial Statements and Disclosure Matters
7. Annual Audit. The Committee will review and discuss the scope of the audit of the Company’s financial statements for each fiscal year, at least annually, with management and the Independent Auditor.
8. Review and Discussion of Audited Financial Statements. The Committee shall review and discuss with the Company's management and Independent Auditor the Company's audited financial statements, the form of audit opinion to be issued by the Independent Auditor on the financial statements and the Company's disclosures under "Management's Discussion and Analysis of Financial Condition and Results of Operations," including the matters required to be discussed under applicable PCAOB standards.
9. The Committee shall consider whether it will recommend to the Board that the Company's audited financial statements be included in the Company's Annual Report on Form 10-K, if applicable.
10. Audit Committee Report. The Committee shall prepare an annual committee report for inclusion where necessary in the proxy statement of the Company relating to its annual meeting of security holders.
11. Review and Discussion of Quarterly Financial Statements. The Committee shall discuss with the Company's management and Independent Auditor the Company's quarterly financial statements and the Company's disclosures under "Management's Discussion and Analysis of Financial Condition and Results of Operations," including the matters required to be discussed under applicable PCAOB standards.
12. Controls and Procedures. The Committee shall periodically review with the Independent Auditor and the Company's financial and accounting personnel the adequacy and effectiveness of the accounting and financial reporting process and controls of the Company. The Committee shall receive and review the reports of the Chief Executive Officer and the Chief Financial Officer as required by Rule 13a-14 under the Exchange Act.
13. Procedures for Complaints. The Committee shall establish procedures for: (a) the receipt, retention, and treatment of complaints received by the Company regarding accounting, internal accounting controls, or auditing matters; and (b) the confidential, anonymous submission by employees of the Company of concerns regarding questionable accounting or auditing matters.
14. Code of Conduct. The Committee will administer the Company’s code of business conduct and ethics, including overseeing the enforcement of the provisions of the code.
15. Internal Audit Function. The Committee will: (a) monitor the Company’s internal audit function, which may be an outsourced or internal function; (b) periodically review the scope and performance of the internal audit plan, including the results of any internal audits, any reports to management and management’s response to those reports; and (c) review and approve the hiring or dismissal of the persons or entities that manage the internal audit function.
16. Risk Management. The Committee shall periodically review and discuss with management and the persons or entities that manage the internal audit function, the risks faced by the Company relating to the Company's accounting and financial reporting processes and the accuracy of the Company's financial disclosures, including guidelines and policies to govern the process by which the Company's exposure to these risks is handled.
17. Oversight of Related Person Transactions. The Committee shall review the Company's policies and procedures for reviewing and approving or ratifying "related person transactions" (defined as transactions required to be disclosed pursuant to Item 404 of Regulation S-K), including the Company's related person transaction policy, and recommend any changes to the Board. In accordance with the Company's related person transaction policy and applicable rules of the Nasdaq Stock Market, the Committee shall conduct appropriate review and oversight of all related person transactions for potential conflict of interest situations on an ongoing basis.
18. Legal Regulatory and Compliance. The Committee shall receive from management, as appropriate, communications and presentations on significant operating and control issues in internal audit reports, management letters, and regulatory authorities' examination reports, and any communications regarding the initiation and status of significant special investigations affecting the Company and its subsidiaries. The Committee will review management reports issued by the Company or any of its subsidiaries in accordance with 12 C.F.R. Part 363 and the corresponding Independent Auditor’s attestation and agreed-upon procedures reports. The Committee shall periodically discuss with the General Counsel: (a) any legal matters that may have a material impact on the Company's financial statements, accounting policies, or compliance with applicable laws and regulations; and (b) any material reports, notices, or inquiries received from regulatory authorities or governmental agencies. The Committee shall have direct communication with the General Counsel, as needed. The Committee shall review with management the Company's program for compliance with all applicable laws, rules and regulations and review the record of such compliance and, if applicable, significant legal cases outstanding against the Company or any of its subsidiaries and other regulatory or legal matters that may have a material effect on the Company's financial statements. The Committee will initiate such other inquiries into the affairs of the Company and its subsidiaries as it deems necessary or appropriate.
19. Review and Approval of Swaps. The Committee is authorized to review and approve the Company's entry into swaps, including transactions in swaps that are subject to mandatory clearing, and to approve use of the end-user exception from clearing. The Committee is also authorized to adopt and shall review annually thereafter a policy relating to the Company's use of the non-financial end-user exception, and shall report to the Board on the Company's compliance with and implementation of this policy on at least an annual basis. The Committee may delegate responsibility for implementation of the non-financial end-user policy to the Company's management, as the Committee deems appropriate.
20. Additional Duties. The Committee shall have such other duties as may be delegated from time to time by the Board.
IV. PROCEDURES AND ADMINISTRATION
1. Procedures. Except as provided in this Charter, the Company's Bylaws shall govern the processes and procedures of the Committee, including the appointment and removal of members of the Committee, the calling and holding of meetings and notice and quorum requirements for meetings, and actions by written consent in lieu of a meeting.
2. Meetings. The Committee shall meet as often as it deems necessary in order to perform its responsibilities. The Committee, in its discretion, may ask members of the Board, management or such other persons as it deems appropriate to attend its meetings (or portions thereof) and to provide information as necessary; provided, that the Committee shall periodically meet separately with the Independent Auditor and Company management. The Committee may also act by unanimous written consent in lieu of a meeting in accordance with the Company's Bylaws. The Committee shall keep regular minutes of its meetings as appropriate.
3 Subcommittees. The Committee may form and delegate authority to one or more subcommittees as it deems appropriate from time to time in its sole discretion; provided, that the Committee shall not delegate to a subcommittee any power or authority required by any law, regulation or Nasdaq Stock Market rule to be exercised by the Committee as a whole. Each subcommittee will consist of one or more members of the Committee.
4. Reports to the Board. The Committee shall report regularly to the Board as appropriate.
5. Charter. At least annually, the Committee shall review and reassess the adequacy of this Charter and recommend any proposed changes to the Board for approval.
6. Advisors. The Committee shall have the authority, in its sole discretion and without further action by the Board, to engage such legal counsel, accounting firms, and other advisors as it deems necessary or appropriate to carry out its duties. Such advisors may be the regular advisors to the Company. The Committee is empowered, without further action by the Board, to cause the Company to pay the compensation of such advisors as established by the Committee.
7. Investigations. The Committee shall have the authority to conduct or authorize investigations into any matters within the scope of its responsibilities as it shall deem appropriate, including the authority to request any officer, employee, or advisor of the Company to meet with the Committee or any advisors engaged by the Committee.
8. Funding. The Company will provide for appropriate funding, as determined by the Committee, for payment of: (a) compensation to any Independent Auditor engaged for the purpose of preparing or issuing an audit report or performing other audit, review or attest services for the Company; (b) compensation to any advisors retained by the Committee; and (c) ordinary administrative expenses of the Committee that are necessary or appropriate in carrying out its duties.
9. Annual Self-Evaluation. At least annually, the Committee shall evaluate its own performance and report on such evaluation to the Board.
Adopted: November 3, 2022
- = Member
- = Chair
- = Financial Expert
- = Independent Director