Alaska Pacific Bancshares, Inc.

Audit Committee Charter

Mission Statement

Independence and Role

The Audit committee is appointed by the Board of Directors of Alaska Pacific Bancshares, Inc. to assist the board in monitoring:

1. the integrity of the financial reporting of the company,
2. the company’s system of internal control,
3. the independence and performance of the company’s independent public accountants and,
4. compliance by the company with legal and regulatory requirements.

Membership

The Audit Committee shall consist of at least three directors, all of whom will be outside directors.

Each member of the Audit Committee shall be, or must become within a reasonable period of time after his or her appointment, financially literate and at least one member of the committee shall have accounting or related financial management expertise.

Meetings

The Audit Committee shall meet bi-monthly, and may meet more frequently as circumstances warrant.

The Audit Committee shall meet with the company’s internal auditor, independent public accountants, Chief Operating Officer or chief financial officer in separate executive sessions whenever the committee shall deem it appropriate.

The Audit Committee shall review with the general counsel of the company the status of legal matters that may have a material impact on the company’s compliance policies, and any material reports or inquiries received from regulators or governmental agencies.

Responsibilities

The Audit Committee shall review with management and the company’s independent public accountants:

1. upon completion of the audit, the annual financial statements of the company, the independent public accountant’s reports thereon and other relevant financial information,
2. prior to the filing of any Form 10-Q, the results of the interim financial review with the committee or its chairman, when required of the independent public accountants by the auditing standards.

The Audit Committee is not responsible for planning or conducting audits or determining the accuracy, completeness or conformity of financial statements.

The Audit Committee shall:

1. review the annual audited financial statements with management, the company’s internal auditors and independent public accountants, and discuss major changes or other issues regarding accounting principles and practices, significant financial reporting issues, and judgments about the quality, not just acceptability, of the company’s accounting principles as applied in its financial reporting;
2. review recommendations made by the company’s internal auditors and independent public accountants with respect to the accounting methods and the adequacy of the system of internal control used by the company;
3. review and approve the audit plans of the company’s internal auditors and independent public accountants;
4. review reports concerning compliance with governmental laws and regulations with the company’s policies relating to business practices and procedures, ethics, conflicts of interest, perquisites, and use of corporate assets and
5. review and approve the engagement of other external audit firms for work performed in such areas as I.T. and loan review;
6. review the company’s activities with respect to compliance with laws and regulations.

After such reviews, the Audit Committee shall report thereon to the Board of Directors and prepare and file any other required reports.

Independent Accountants

The Audit Committee shall instruct the company’s independent public accountants that they are ultimately accountable to the Board of Directors and the Audit Committee, and that the Board and Committee are responsible for the selection subject to shareholder approval, evaluation, and termination of such independent accountants.

As part of its review of auditor qualifications, the Audit Committee shall consider management’s plans for engaging the independent public accountants for non-audit services.

Investigations and Projects

The Audit Committee shall have the power to conduct or authorize special investigations or projects, which it considers necessary to discharge its duties and responsibilities.  It shall have the power to retain independent outside accountants, counsel or others to assist in the conduct of any investigation and may utilize the company’s general counsel, internal auditors or compliance officer for such purpose.

Charter Review
The Audit Committee shall reassess and review annually the adequacy of this charter.

Report
The Audit Committee shall approve the report required to be included in the company’s annual proxy statement after having completed the discussion and reviews and having considered the matters required in connection with the report.  The report shall include the committee’s recommendations to the board concerning the inclusion of the audited financial statements in the company’s Annual Report on Form 10-K.

Administration

Management will assure that accurate minutes are prepared for all committee meetings. Copies of minutes of all committee meetings will be provided to committee members as part of the regular meeting packet following a committee meeting. All meetings will be conducted in accordance with the established agenda, which will be determined by the Chairperson of the Committee before a scheduled meeting.

Investor information is provided in the event that you are interested in considering Alaska Pacific Bancshares, Inc. stock as an investment. Alaska Pacific does not sell its own stock and this is not a solicitation for you to purchase stock. It is simply an informational service. It is important that you understand that Alaska Pacific Bancshares stock is not FDIC insured and should not be confused with Alaska Pacific Bank deposit products.