Sturgis Bank & Trust Company

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STURGIS BANCORP, INC. (the “Company”)

CHARTER

AUDIT COMMITTEE

The Audit Committee is a committee of the Board of Directors.

PURPOSE & COMPOSITION

The charter details the composition, roles and responsibilities of the audit committee. The Board of Directors shall appoint at least three directors who are independent of the Company’s management and have no relationships that could interfere with their independence and execution of the Committee’s responsibilities to the Board of Directors. At least one member must have expertise in accounting or other aspects of financial management and all members are expected to be financially literate or to gain such literacy after appointment. The Committee shall review this charter annually and receive approval for its continued use (and any recommended amendments) from the Board of Directors.

DELINEATION OF RESPONSIBILITIES

The audit committee is principally responsible for overseeing the Company’s financial reporting and reporting details of such activities to the Board, primarily in the form of auditing the financial statements which management prepares on the Company’s behalf. The Committee shall take a flexible approach to the execution of its role to best reflect current circumstances and changing business conditions, and is expected to establish on the board’s behalf the overall attitude of the Company as it pertains to financial reporting, risk management and ethical conduct.

ONGOING PROCESSES

In performing these responsibilities, the audit committee shall follow a number of prescribed guidelines, and may augment these when appropriate:

Independent auditors are accountable to the Committee and the Board in their roles as appointed representatives of the Company’s shareholders. As such, the Committee is expected to evaluate, and if necessary, recommend replacement of the independent auditors to the Board and shareholders. The Committee shall review the nature of this independence, and any written disclosures prepared by the auditors, with the auditors.
The Committee shall discuss the plans and scope of audits, including staffing and compensation, with both internal and independent auditors. The Committee shall conduct separate meetings with both the internal auditors and independent auditors, both with and without members of the management team present. Finally, the Committee will discuss the effectiveness and adequacy of financial controls, accounting procedures, risk management, and legal and ethical compliance issues with management, internal auditors and independent auditors.
Before the filing of the Company’s quarterly Form 10-Q report, the Committee, management and the independent auditors shall review the interim financial statements. The independent auditors shall discuss the results with the Committee (or its chairperson,) along with any other matters required under generally accepted auditing standards.
Before the filing of the Company’s annual Form 10-K report, the Committee, management and the independent auditors shall review the interim financial statements. This review should look beyond adequacy to the quality of the underlying accounting principles, the clarity of any financial statement disclosures and whether accounting judgements are reasonable. The independent auditors shall discuss the results with the Committee, along with any other matters required under generally accepted auditing standards.
The Audit Committee is empowered to review, with the Company’s counsel, legal matters, including litigation, compliance with securities trading policies, the foreign corrupt practices act and other laws having a significant impact on the Company’s business or its financial statements; and, to investigate any matter brought to its attention within the scope of its duties, and retain outside counsel for this purpose if, in its judgement, that is appropriate.
The Audit Committee has established procedures whereby employees can submit confidential, anonymous concerns regarding questionable accounting or auditing matters. The Audit Committee has also established procedures for the receipt, retention, and treatment of complaints received regarding accounting, internal controls, or auditing matters. The procedures are made a part of this Charter.
This Charter will be made public by posting on the Bank’s web site.

PROCEDURES WHEREBY EMPLOYEES CAN SUBMIT CONFIDENTIAL, ANONYMOUS CONCERNS REGARDING QUESTIONABLE ACCOUNTING OR AUDITING MATTERS

• • Any concerns an employee may have regarding questionable accounting or auditing matters may submit their concern to any Board audit committee member. • • The submission must be in writing and addressed to one of the above mentioned persons. It must be marked “confidential”. • • The submission may be done anonymously without fear of intimation or retaliation. • • All reports of concern and/or complaints will be retained in a file controlled by the audit committee chairman.

Adopted February 18, 2002 Amended December 9, 2002