Peoples Bancorp of North Carolina, Inc.

(Name of Registrant as Specified In Its Charter)

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

(3)  Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):

 

 

 

 

 

 

 

 

 

Notice of 2021 Annual Meeting,

Proxy Statement and

Annual Report

 

 

 

 

 

 

 

 

 

PEOPLES BANCORP OF NORTH CAROLINA, INC.

PROXY STATEMENT

Table of Contents

Page

Notice of 2021 Annual Meeting of Shareholders	ii
Proxy Statement	3
Information About The Annual Meeting	3
Security Ownership Of Certain Beneficial Owners and Management	7
Section 16(a) Beneficial Ownership Reporting Compliance	9
Proposal 1 - Election of Directors	10
Director Nominees	10
Executive Officers of the Company	12
How often did our Board of Directors meet during 2020?	12
What is our policy for director attendance at Annual Meetings?	12
How can you communicate with the Board or its members?	12
Board Leadership Structure and Risk Oversight	13
Code of Business Conduct and Ethics	13
Diversity of the Board of Directors	13
How can a shareholder nominate someone for election to the Board of Directors?	14
Who serves on the Board of Directors of the Bank?	14
Board Committees	14
Executive Committee	14
Governance Committee	14
Audit and Enterprise Risk Committee	15
Compensation Discussion and Analysis	15
Summary Compensation Table	20
Grants of Plan-Based Awards	21
Outstanding Equity Awards at Fiscal Year End	21
Option Exercises and Stock Vested	22
Pension Benefits	22
Nonqualified Deferred Compensation	23
Employment Agreements	23
Potential Payments upon Termination or Change in Control	24
Omnibus Stock Option and Long Term Incentive Plan	25
Director Compensation	25
Indebtedness of and Transactions with Management and Directors	27
Equity Compensation Plan Information	29

 

Stock Performance Graph	32
Proposal 2 –Amendment to Articles of Incorporation to Implement a Majority Voting Standard in Uncontested Elections of Directors	33
Proposal 3 - Ratification of Selection of Independent Registered Public Accounting Firm	34
Audit Fees Paid to Independent Auditors	34
Date for Receipt of Shareholder Proposals	35
Other Matters	35
Miscellaneous	35

Appendices

 

 

 

PEOPLES BANCORP OF NORTH CAROLINA, INC.

Post Office Box 467

518 West C Street

Newton, North Carolina 28658-0467

(828) 464-5620

 

NOTICE OF 2021 ANNUAL MEETING OF SHAREHOLDERS

 

NOTICE IS HEREBY GIVEN that the 2021 Annual Meeting of Shareholders of Peoples Bancorp of North Carolina, Inc. (the “Company”) will be held virtually on May 6, 2021 at 11:00 a.m., Eastern Time. The purposes of the Annual Meeting are to consider and vote upon the following matters:

This year, out of an abundance of caution and to continue to deal with the health impact of the coronavirus disease known as “COVID-19”, and in an effort to mitigate risks to the health and safety or our communities, shareholders, employees and other stakeholders, we will hold our Annual Meeting in a virtual only format, which will be conducted via live audio webcast. Shareholders will have an equal opportunity to participate at the Annual Meeting online regardless of their geographic location.

 

Shareholders desiring to attend in the Annual Meeting must email the Company’s Assistant Corporate Secretary, Krissy Price, kprice@peoplesbanknc.com, on or before 5:30 p.m., Eastern Time, on Wednesday, May 5, 2021, stating (1) such shareholder’s name, address, phone number and the 15-digit identification code that appears on such shareholder’s proxy card, (2) the number of shares of the Company’s common stock that they held of record as of March 5, 2021 and (3) that they desire to attend in the Annual Meeting. The Company will then take measures to verify such shareholder’s identity. After verifying such shareholder’s identity, those shareholders desiring to attend in the Annual Meeting will be sent a response email providing the information which will enable them to attend the Annual Meeting via remote participation. In addition, rules of conduct for remote participation in the Annual Meeting will be provided in the response email. Shareholders are encouraged to vote their shares prior to the Annual Meeting, as directed on the proxy cards received by them.

 

The Board of Directors has established March 5, 2021, as the record date for the determination of shareholders entitled to notice of and to vote at the Annual Meeting. If an insufficient number of shares is present in person or by proxy to constitute a quorum at the time of the Annual Meeting, the Annual Meeting may be adjourned in order to permit further solicitation of proxies by the Company.

 

Your vote is important. We urge you to vote as soon as possible so that your votes will be properly recorded. You may vote by executing and returning your proxy card in the accompanying envelope, or by voting electronically over the Internet or by telephone. Please refer to the proxy card enclosed for information on voting electronically and by phone. If you attend the Annual Meeting, you may vote in person and the proxy will not be used.

 

By Order of the Board of Directors, Lance A. Sellers President and Chief Executive Officer

Newton, North Carolina

March 24, 2021

 

PEOPLES BANCORP OF NORTH CAROLINA, INC.

______________________________________

PROXY STATEMENT

______________________________________

Annual Meeting of Shareholders

To Be Held On May 6, 2021

_____________________________________

This Proxy Statement is being mailed to our shareholders on or about March 24, 2021, for solicitation of proxies by the Board of Directors of Peoples Bancorp of North Carolina, Inc. Our principal executive offices are located at 518 West C Street, Newton, North Carolina 28658. Our telephone number is (828) 464-5620.

In this Proxy Statement, the terms “we,” “us,” “our” and the “Company” refer to Peoples Bancorp of North Carolina, Inc. The term “Bank” means Peoples Bank, our wholly-owned, North Carolina-chartered bank subsidiary. The terms “you” and “your” refer to the shareholders of the Company.

 

Important Notice Regarding the Availability of Proxy Materials for the Shareholder Meeting to Be Held on May 6, 2021. The Notice, Proxy Statement and the Annual Report to Shareholders for the year ended December 31, 2020 are also available at https://pebk.q4ir.com/filings-financials/proxy-material-and-annual-report/default.aspx. You may also access the above off-site website by going to www.peoplesbanknc.com and click on the link.

INFORMATION ABOUT THE ANNUAL MEETING

Your vote is very important. For this reason, our Board of Directors is requesting that you allow your common stock to be represented at the 2021 Annual Meeting of Shareholders by the proxies named on the enclosed proxy card.

When is the Annual Meeting?		May 6, 2021, at 11 a.m., Eastern Time.
What items will be voted on at the
Annual Meeting?		1	ELECTION OF DIRECTORS. To elect ten directors to serve until the 2022 Annual Meeting of Shareholders.
		2	APPROVAL OF AMENDMENT TO ARTICLES OF INCORPORATION. To approve an amendment to the Company’s Articles of Incorporation to implement a majority voting standard in uncontested elections of directors.
		3	RATIFICATION OF SELECTION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM. To ratify the appointment of Elliott Davis, PLLC (“Elliott Davis”) as the Company’s independent registered public accounting firm for fiscal year 2021.
		4	OTHER BUSINESS. To consider any other business as may properly come before the Annual Meeting or any adjournment.

 

 

Who can vote?			Only holders of record of our common stock at the close of business on March 5, 2021 (the “Record Date”) will be entitled to notice of and to vote at the Annual Meeting and any adjournment of the Annual Meeting. On the Record Date, there were 5,789,166 shares of our common stock outstanding and entitled to vote and 675 shareholders of record.
How do I vote by proxy?			You may vote your shares by marking, signing and dating the enclosed proxy card and returning it in the enclosed postage-paid envelope or by voting electronically over the Internet or by telephone using the information on the proxy card. If you return your signed proxy card before the Annual Meeting, the proxies will vote your shares as you direct. The Board of Directors has appointed proxies to represent shareholders who cannot attend the Annual Meeting.
			For the election of directors, you may vote for (1) all of the nominees, (2) none of the nominees, or (3) all of the nominees except those you designate. If a nominee for election as a director becomes unavailable for election at any time at or before the Annual Meeting, the proxies will vote your shares for a substitute nominee. For each other item of business, you may vote “FOR” or “AGAINST” or you may “ABSTAIN” from voting.
			If you return your signed proxy card but do not specify how you want to vote your shares, the proxies will vote them “FOR” the election of all of our nominees for directors and “FOR” all other proposals presented in this Proxy Statement in accordance with recommendations from the Board of Directors.
			If your shares are held in the name of a broker or other nominee (i.e., held in “street name”), you will need to obtain a proxy instruction card from the broker holding your shares and return the card as directed by your broker. Your broker is not permitted to vote on your behalf on the election of directors unless you provide specific instructions by following the instructions from your broker about voting your shares by telephone or Internet or completing and returning the voting instruction card provided by your broker. For your vote to be counted in the election of directors you will need to communicate your voting decision to your bank, broker or other holder of record before the date of the Annual Meeting.
			We are not aware of any other matters to be brought before the Annual Meeting. If matters other than those discussed above are properly brought before the Annual Meeting, the proxies may vote your shares in accordance with their best judgment.
How do I change or revoke my proxy?			You can change or revoke your proxy at any time before it is voted at the Annual Meeting in any of three ways: (1) by delivering a written notice of revocation to the Secretary of the Company; (2) by delivering another properly signed proxy card

 

to the Secretary of the Company with a more recent date than your first proxy card or by changing your vote by telephone or the Internet; or (3) by attending the Annual Meeting and voting at the Annual Meeting. You should deliver your written notice or superseding proxy to the Secretary of the Company at our principal executive offices listed above. See information under the heading “How do I attend and participate at the Annual Meeting?” below for information on how to attend and vote at the Annual Meeting.

 

How many votes can I cast?			You are entitled to one vote for each share held as of the Record Date on each nominee for election and each other matter presented for a vote at the Annual Meeting. You may not vote your shares cumulatively in the election of directors.
How many votes are required to approve the proposals?			If a quorum is present at the Annual Meeting, each director nominee will be elected by a plurality of the votes cast in person or by proxy. If you withhold your vote on a nominee, your shares will not be counted as having voted for that nominee. The proposal to approve the amendment to the Company’s Articles of Incorporation will be approved by the affirmative vote of the holders of a majority of the shares present, or represented by proxy, at the Annual Meeting. The proposal to ratify the appointment of the Company’s independent registered public accounting firm for 2021 will be approved if the votes cast in favor exceed the votes cast in opposition.
			Any other matters properly coming before the Annual Meeting for a vote will require the affirmative vote of the holders of a majority of the shares represented in person or by proxy at the Annual Meeting and entitled to vote on that matter.
			In the event there are insufficient votes present at the Annual Meeting for a quorum or to approve or ratify any proposal, the Annual Meeting may be adjourned in order to permit the further solicitation of proxies.
What constitutes a “quorum” for the Annual Meeting?			A majority of the outstanding shares of our common stock entitled to vote at the Annual Meeting, present in person or represented by proxy, constitutes a quorum (a quorum is necessary to conduct business at the Annual Meeting). Your shares will be considered part of the quorum if you have voted your shares by proxy or by telephone or Internet. Abstentions, broker non-votes and votes withheld from any director nominee count as shares present at the Annual Meeting for purposes of determining a quorum.
Who pays for the solicitation of proxies?			We will pay the cost of preparing, printing and mailing materials in connection with this solicitation of proxies. In addition to solicitation by mail, our officers, directors and regular employees, as well as those of the Bank, may make solicitations

 

personally, by telephone or otherwise without additional compensation for doing so. We reserve the right to engage a proxy solicitation firm to assist in the solicitation of proxies for the Annual Meeting. We will, upon request, reimburse brokerage firms, banks and others for their reasonable out-of-pocket expenses in forwarding proxy materials to beneficial owners of stock or otherwise in connection with this solicitation of proxies.

How do I attend and participate at the
Annual Meeting?			The Company is holding the Annual Meeting in a virtual only format, which will be conducted via live audio webcast. Shareholders will not be able to attend the Annual Meeting in person. Attending the Annual Meeting online enables registered shareholders and duly appointed proxyholders, including beneficial shareholders who have duly appointed themselves as proxyholder, to participate at the Annual Meeting and ask questions, all in real time. Registered shareholders and duly appointed proxyholders can vote at the appropriate times during the Annual Meeting.
			Shareholders desiring to participate in the Annual Meeting must email the Company’s Assistant Corporate Secretary, Krissy Price, kprice@peoplesbanknc.com, on or before 5:30 p.m., Eastern Time, on Wednesday, May 5, 2021, stating (1) such shareholder’s name, address, phone number and the 15-digit identification code that appears on such shareholder’s proxy card, (2) the number of shares of the Company’s common stock that they held of record as of March 5, 2021 and (3) that they desire to participate in the Annual Meeting. The Company will then take measures to verify such shareholder’s identity. After verifying such shareholder’s identity, those shareholders desiring to participate in the Annual Meeting will be sent a response email providing the information which will enable them to join in the Annual Meeting via remote participation. In addition, rules of conduct for remote participation in the Annual Meeting will be provided in the response email. Shareholders are encouraged to vote their shares prior to the Annual Meeting, as directed on the proxy cards received by them.

 

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

 

The Exchange Act requires that any person who acquires the beneficial ownership of more than five percent (5%) of the Company’s common stock notify the Securities and Exchange Commission (the “SEC”) and the Company. Following is certain information, as of the Record Date, regarding those persons or groups who held of record, or who are known to the Company to own beneficially, more than five percent (5%) of the Company’s outstanding common stock.

Name and Address of Beneficial Owner	Amount and Nature of Beneficial Ownership1	Percentof Class2
Estate of Christine S. Abernethy P.O. Box 386 Newton, NC 28658	726,3903	12.55%
James S. Abernethy Post Office Box 327 Newton, NC 28658	861,3804	14.88%
Robert C. Abernethy Post Office Box 366 Newton, NC 28658	900,9995	15.56%

    ________________________________

 

Set forth below is certain information, as of the Record Date (unless otherwise indicated), regarding those shares of common stock owned beneficially by each of the persons who currently serves as a member of the Board of Directors, is a nominee for election to the Board of Directors at the Annual Meeting, or is or was during the fiscal year ended December 31, 2020 a named executive officer of the Company. Also shown is the number of shares of common stock owned by the directors and executive officers of the Company as a group.

 

Name and Address	Amount and Nature of Beneficial Ownership1	Percentage of    Class2
James S. Abernethy Post Office Box 327 Newton, NC 28658	861,3803	14.88%
Robert C. Abernethy Post Office Box 366 Newton, NC 28658	900,9994	15.56%
William D. Cable, Sr. Post Office Box 467 Newton, NC 28658	25,347	*
Jeffrey N. Hooper10 Post Office Box 467 Newton, NC 28658	0	*
Douglas S. Howard Post Office Box 587 Denver, NC 28037	20,4255	*
A. Joseph Lampron, Jr.11 Post Office Box 467 Newton, NC 28658	17,492	*
John W. Lineberger, Jr. Post Office Box 481 Lincolnton, NC 28092	4,795	*
Gary E. Matthews 210 First Avenue South Conover, NC 28613	25,846	*
Billy L. Price, Jr., M.D. 540 11th Ave. Place NW Hickory, NC 28601	10,792	*
Larry E. Robinson Post Office Box 723 Newton, NC 28658	67,0586	1.16%
Lance A. Sellers Post Office Box 467 Newton, NC 28658	26,325	*
William Gregory Terry Post Office Box 610 Newton, NC 28658	22,111	*
Dan Ray Timmerman, Sr. Post Office Box 1148 Conover, NC 28613	103,2457	1.78%

 

Benjamin I. Zachary Post Office Box 277 Taylorsville, NC 28681	114,4288	1.98%
All current directors and nominees and Executive officers (or former executive officers) as a group (14 people)	1,401,3269	24.21%

*Does not exceed one percent of the common stock outstanding.

_______________

 

 

 

 

 

 

 

 

 

 

 

Directors James S. Abernethy and Robert C. Abernethy are brothers and are sons of Christine S. Abernethy, who passed away in November of 2020 and owned in excess of ten percent (10%) of the common stock of the Company at the time of her death. Directors James S. Abernethy and Robert C. Abernethy are co-executors of Ms. Abernethy’s estate.

 

 

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

 

Section 16(a) of the Exchange Act requires the Company’s executive officers and directors, and persons who own more than ten percent (10%) of the common stock, to file reports of ownership and changes in ownership with the SEC. Executive officers, directors and greater than ten percent (10%) beneficial owners are required by SEC regulations to furnish the Company with copies of all Section 16(a) forms they file.

 

Based solely on a review of the copies of such forms furnished to the Company and written representations from the Company’s executive officers and directors, the Company believes that during the fiscal year ended December 31, 2020, its executive officers and directors and greater than ten percent (10%) beneficial owners complied with all applicable Section 16(a) filing requirements.

 

PROPOSAL 1

 

ELECTION OF DIRECTORS

 

Our Board of Directors has set its number at ten members. Our current Bylaws provide that in order to be eligible for consideration at the Annual Meeting of Shareholders, all nominations of directors, other than those made by the Governance Committee or the Board of Directors, must be in writing and must be delivered to the Secretary of the Company not less than 50 days nor more than 90 days prior to the meeting at which such nominations will be made; provided, however, that if less than 60 days’ notice of the meeting is given to the shareholders, such nominations must be delivered to the Secretary of the Company not later than the close of business on the tenth day following the day on which the notice of meeting was mailed.

 

Information about the nominees for election to the Board of Directors for a one-year term until the 2022 Annual Meeting of Shareholders appears below. All of the nominees are currently serving on the Board of Directors.

Director Nominees

James S. Abernethy, age 66 (as of February 1, 2021), is employed by Carolina Glove Company, Inc., a glove manufacturing company as its Vice President. Mr. Abernethy continues to serve as President and Assistant Secretary of Midstate Contractors, Inc., a paving company and also as Vice President, Secretary and Chairman of the Board of Directors of Alexander Railroad Company. He has served as a director of the Company since 1992. Mr. Abernethy has a total of 28 years of banking experience and is a graduate of the North Carolina Bank Directors’ College and attended the initial Advanced Directors’ Training session offered by the North Carolina Bank Directors’ College in association with the College of Management at North Carolina State University. Mr. Abernethy earned a business administration degree from Gardner Webb University in North Carolina. Over his 27 years of service on the Board of Directors, Mr. Abernethy has served on all the Bank’s and the Company’s committees.

 

Robert C. Abernethy, age 70 (as of February 1, 2021), is employed by Carolina Glove Company, Inc., a glove manufacturing company, as its President, Secretary and Treasurer. Mr. Abernethy continues to serve as Secretary and Assistant Treasurer of Midstate Contractors, Inc., a paving company. He has served as a director of the Company since 1976 and as Chairman since 1991. Mr. Abernethy has a total of 44 years of banking experience and is a graduate of the North Carolina Bank Directors’ College and attended the initial Advanced Directors’ Training session offered by the North Carolina Bank Directors’ College in association with the College of Management at North Carolina State University. Mr. Abernethy earned a B.S. degree from Gardner Webb University in North Carolina. He serves on the Finance Committee and Investment Committee of Grace United Church of Christ. Mr. Abernethy also serves on the board of directors of Carolina Glove Company, Inc. and Midstate Contractors, Inc. both privately held companies.

 

Douglas S. Howard, age 62 (as of February 1, 2021), is employed by Denver Equipment Company of Charlotte, Inc. as Vice President and Treasurer. Mr. Howard is also an owner of Howard, Helderman, Howard, LLC. He has served as a director of the Company since 2004. Mr. Howard has a total of 22 years of banking experience and is a graduate of the North Carolina Bank Directors’ College and attended the initial Advanced Directors’ Training session

 

 

offered by the NC Bank Directors’ College in association with the College of Management at North Carolina State University. Mr. Howard formerly served as the Chairman of the Board of Trustees of Catawba Valley Medical Center and as the Chairman of the Board of Directors of Catawba Valley Medical Group. Mr. Howard continues to serve as a director of Catawba Valley Medical Center. 

 

John W. Lineberger, Jr., age 70 (as of February 1, 2021), is employed by Lincoln Bonded Warehouse Company, a commercial warehousing facility, as President. He has served as a director of the Company since 2004. Mr. Lineberger has a total of 16 years of banking experience and is a graduate of the North Carolina Bank Directors’ College and attended the initial Advanced Directors’ Training session offered by the NC Bank Directors’ College in association with the College of Management at North Carolina State University. Mr. Lineberger earned a B.S. degree in business administration from Western Carolina University.

Gary E. Matthews, age 65 (as of February 1, 2021), is employed by Matthews Construction Company, Inc. as its President and a Director. He has served as a director of the Company since 2001. Mr. Matthews has a total of 19 years of banking experience, is a graduate of the North Carolina Bank Directors’ College, and attended the initial Advanced Directors’ Training session offered by the NC Bank Directors’ College in association with the College of Management at North Carolina State University. Mr. Matthews is also a director of Conover Metal Products, a privately held company. Mr. Matthews earned a B.S. degree in civil engineering/construction from North Carolina State University.

 

Billy L. Price, Jr., M.D., age 64 (as of February 1, 2021), is a Practitioner of Internal Medicine at BL Price Jr Medical Consultants, PLLC. Dr. Price served on the Board of Trustees of Catawba Valley Medical Center through 2018. He has served as a director of the Company since 2004. Dr. Price has a total of 16 years of banking experience and is a graduate of the North Carolina Bank Directors’ College and attended the initial Advanced Directors’ Training session offered by the NC Bank Directors’ College in association with the College of Management at North Carolina State University. Dr. Price was previously the owner/pharmacist of Conover Drug Company. He is also a Medical Director of Healthgram Medical, a private company. Dr. Price earned a B.S. degree in pharmacy from the University of North Carolina at Chapel Hill and his MD from East Carolina University School of Medicine. He serves as Medical Director and Assistant Professor to Lenoir Rhyne University Physician Assistants Master of Science Program.

 

Larry E. Robinson, age 75 (as of February 1, 2021, is a shareholder, director and Chief Executive Officer of The Blue Ridge Distributing Company, Inc., a beer and wine distributor. He is also a director and member of the Board of Directors of United Beverages of North Carolina, LLC, a malt beverage beer distributor. He has served as a director of the Company since 1993. Mr. Robinson has a total of 27 years of banking experience and is a graduate of the North Carolina Bank Directors’ College. Mr. Robinson attended Western Carolina University and received an Associate Degree in Business and Accounting from Catawba Valley Community College in North Carolina.

 

William Gregory Terry, age 53 (as of February 1, 2021), is President of Hole-in-One Advantage, LLC and a consultant/director of Drum & Willis-Reynolds Funeral Homes and Crematory. Mr. Terry also served as President of DFH Holdings from July 2007 through December of 2019. He has served as a director of the Company since 2004. Mr. Terry has a total of 16 years of banking experience and is a graduate of the North Carolina Bank Directors’ College and attended the initial Advanced Directors’ Training session offered by the NC Bank Directors’ College in association with the College of Management at North Carolina State University. Mr. Terry graduated with a B.S. degree in business management from Clemson University in South Carolina. Mr. Terry serves on numerous civic and community boards.

 

Dan Ray Timmerman, Sr., age 73 (as of February 1, 2021), is a shareholder, director, Chairman of the Board of Directors and the Chief Executive Officer of Timmerman Manufacturing, Inc., a wrought iron furniture, railings and gates manufacturer. He has served as a director of the Company since 1995. Mr. Timmerman has a total of 25 years of banking experience and is a graduate of the North Carolina Bank Directors’ College and attended the initial Advanced Directors’ Training session offered by the NC Bank Directors’ College in association with the College of Management at North Carolina State University. Mr. Timmerman earned a B.S. degree in business administration with a concentration in accounting from Lenoir-Rhyne University in North Carolina.

 

 

Benjamin I. Zachary, age 64 (as of February 1, 2021), is employed by Alexander Railroad Company as its President, Treasurer, General Manager and Director. He has served as a director of the Company since 1995. Mr. Zachary has a total of 25 years of banking experience and is a graduate of the North Carolina Bank Directors’ College. Mr. Zachary earned a B.S. degree in business administration with a concentration in accounting from the University of North Carolina at Chapel Hill. He worked as a CPA for a national accounting firm for eight years following graduation where his assignments included financial statement audits of several banks.  Mr. Zachary is a member of the Taylorsville Rotary Club and serves as Treasurer for the Taylorsville Rotary Club and its Foundation.

 

We have no reason to believe that any of the nominees for election will be unable or will decline to serve if elected. In the event of death or disqualification of any nominee or the refusal or inability of any nominee to serve as a director, however, the proxies will vote for the election of another person as they determine in their discretion or may allow the vacancy to remain open until filled by the Board of Directors. In no circumstance will any proxy be voted for more than two nominees who are not named in this Proxy Statement. Properly executed and returned proxies, unless revoked, will be voted as directed by you or, in the absence of direction, will be voted in favor of the election of the recommended nominees. An affirmative vote of a plurality of votes cast at the Annual Meeting is necessary to elect a nominee as a director.

 

THE BOARD OF DIRECTORS RECOMMENDS YOU VOTE “FOR” ALL OF THE NOMINEES NAMED ABOVE AS DIRECTORS

Executive Officers of the Company

 

During 2020, our executive officers were:

 

Lance A. Sellers, age 58 (as of February 1, 2021), serves as the President and Chief Executive Officer of the Company and the Bank. Prior to becoming the President and Chief Executive Officer of the Company and the Bank, Mr. Sellers served as Executive Vice President and Assistant Corporate Secretary of the Company and Executive Vice President and Chief Credit Officer of the Bank. He has been employed by the Company and the Bank since 1998. Mr. Sellers has a total of 36 years of banking experience. He is a graduate of the University of North Carolina at Chapel Hill and served as a senior credit officer at a regional bank headquartered in North Carolina.

 

William D. Cable, Sr., age 52 (as of February 1, 2021), serves as Executive Vice President, Assistant Corporate Treasurer and Corporate Secretary of the Company and Executive Vice President and Chief Operating Officer of the Bank. He has been employed by the Company and the Bank since 1995, where he has served as Senior Vice President-Information Services. Mr. Cable has a total of 29 years of banking experience. Prior to joining the Company, Mr. Cable was a regulatory examiner with the Federal Deposit Insurance Corporation. He is a graduate of Western Carolina University and the School of Banking of the South at Louisiana State University.

 

A. Joseph Lampron, Jr., age 66 (as of February 1, 2021), served as Executive Vice President, Chief Financial Officer, Corporate Treasurer and Assistant Corporate Secretary of the Company and Executive Vice President and Chief Financial Officer of the Bank until May 11, 2020. On May 11, 2020, Mr. Lampron transitioned from the Company’s and the Bank’s Chief Financial Officer to the Company’s and the Bank’s Chief Administrative Officer until his retirement on June 30, 2020. Prior to retirement, Mr. Lampron had been employed by the Company and the Bank since 2001. Mr. Lampron is a graduate of the University of North Carolina at Chapel Hill and upon graduation worked as a certified public accountant with a national accounting firm. His work with the firm included audits of banks and thrift institutions. Mr. Lampron has also served as Chief Financial Officer of a thrift institution and as a senior change manager in the finance group of a large North Carolina bank.

 

Jeffrey Hooper, age 51 (as of February 1, 2021) serves as an Executive Vice President, Chief Financial Officer, Corporate Treasurer and Assistant Corporate Secretary of the Company and Executive Vice President and Chief Financial Officer of the Bank. Mr. Hooper joined the Company and the Bank on March 2, 2020. Prior to joining the Company and the Bank, Mr. Hooper was an Executive Vice President and Chief Financial Officer of First South

 

Bancorp, Inc. and First South Bank. He is a Certified Public Accountant and a graduate of the University of Alaska. Mr. Hooper has a total of 15 years of banking experience.

We do not have formal procedures for shareholder communication with our Board of Directors. In general, our directors and officers are easily accessible by telephone, postal mail or e-mail. Any matter intended for your Board of Directors, or any individual director, can be directed to Lance Sellers, our President and Chief Executive Officer, or Jeffrey Hooper, our Chief Financial Officer, at our principal executive offices at 518 West C Street, Newton, North Carolina 28658. You also may direct correspondence to our Board of Directors, or any of its members, in care of the Company at the foregoing address. Your communication will be forwarded to the intended recipient unopened.

 

Board Leadership Structure and Risk Oversight

 

Our Company and the Bank have traditionally operated with separate Chief Executive Officer and Chairman of the Board of Directors positions. We believe it is our Chief Executive Officer’s responsibility to manage the Company and the Chairman’s responsibility to lead the Board of Directors. Robert Abernethy is currently serving as Chairman of the Board of Directors, and James Abernethy is currently serving as the Vice Chairman of the Board of Directors. Other than Directors Lineberger and Matthews, during the year ended December 31, 2020, the Board of Directors has determined that all of the members of the Board of Directors are independent under applicable NASDAQ listing requirements.  The Company has five standing committees: Executive, Loan Sub-Committee, Governance, Audit and Enterprise Risk and Compensation. The Chief Executive Officer serves on the Executive Committee. The Bank, in addition to the above-named committees, has a Loan Committee and a Loan Sub-Committee. The duties of the Company’s committees are described below. Each of the Company’s and the Bank’s committees considers risk within its area of responsibility. The Audit and Enterprise Risk Committee and the full Board of Directors focus on the Company’s most significant risks in the areas of liquidity, credit, interest rate and general risk management strategy. The Board of Directors sets policy guidelines in the areas of loans and asset/liability management which are reviewed on an on-going basis. While the Board of Directors oversees the Company’s risk management, the Company’s and the Bank’s management are responsible for day-to-day risk management following the dictates of the policy decisions set by the Board of Directors.

 

The Governance Committee, as part of its annual review, evaluates the Board of Directors leadership structure and performance and reports its findings to the whole Board of Directors. The Board of Directors believes that having separate persons serving as Chief Executive Officer and Chairman provides the optimal board leadership structure for the Company and its shareholders.

 

Code of Business Conduct and Ethics

 

The Company and the Bank have a Code of Business Conduct and Ethics for its directors, officers and employees. The Code of Business Conduct and Ethics requires that individuals avoid conflicts of interest, comply with all laws and other legal requirements, conduct business in an honest and ethical manner and otherwise act with integrity

 

 

 

and in the best interests of the Company and the Bank. The Code of Business Conduct and Ethics is a guide to help ensure that all employees live up to the highest ethical standards of behavior. How can a shareholder nominate someone for election to the Board of Directors?

 

Our Bylaws provide that in order to be eligible for consideration at the Annual Meeting of Shareholders, all nominations of directors, other than those made by the Governance Committee or the Board of Directors, must be in writing and must be delivered to the Secretary of the Company not less than 50 days nor more than 90 days prior to the meeting at which such nominations will be made. However, if less than 60 days’ notice of the meeting is given to the shareholders, such nominations must be delivered to the Secretary of the Company not later than the close of business on the tenth day following the day on which the notice of meeting was mailed.

 

The Board of Directors may disregard any nominations that do not comply with these requirements. Upon the instruction of the Board of Directors, the inspector of voting for the Annual Meeting may disregard all votes cast for a nominee if the nomination does not comply with these requirements. Written notice of nominations should be directed to the Secretary of the Company.

Who serves on the Board of Directors of the Bank?

The Bank has ten directors currently serving on its Board of Directors, who are the same people who are currently directors of the Company.

 

Board Committees

 

During 2020, our Board of Directors had five standing committees, the Audit and Enterprise Risk Committee, the Governance Committee, the Compensation Committee, the Executive Committee and the Loan Sub-Committee. The voting members of these Committees are appointed by the Board of Directors annually from among its members. Certain of our executive officers also serve as non-voting, advisory members of these committees.

 

Executive CommitteeExecutive Committee. The Executive Committee performs duties as assigned by the full Board of Directors. Actions taken by the Executive Committee must be approved by the full Board of Directors. The following persons currently serve on the Executive Committee: Directors R. Abernethy, J. Abernethy, Lineberger, Robinson and Terry, as well as the President and Chief Executive Officer of the Company in a non-voting capacity. It meets on an “as needed” basis and did not meet during 2020.

 

 

 

The Governance Committee met twice during the year ended December 31, 2020.

 

The Governance Committee has a written charter which is reviewed annually, and amended as needed, by the Governance Committee. A copy of the Governance Committee Charter is available on the Bank’s website (www.peoplesbanknc.com) under Investor Relations.

 

Audit and Enterprise Risk Committee. The Company has a separately designated standing Audit and Risk Enterprise Committee (the “Audit Committee”) which was established in accordance with Section 3(a)(58)(A) of the Exchange Act. The Audit Committee’s responsibilities include oversight of enterprise risk. The Audit Committee has a written charter which is reviewed annually, and amended as needed, by the Audit Committee. A copy of the Audit Committee Charter is available on the Bank’s website (www.peoplesbanknc.com) under Investor Relations. The following persons currently serve on the Audit Committee: Directors R. Abernethy, J. Abernethy, Howard, Price, Timmerman and Zachary.

 

Notwithstanding that Directors J. Abernethy and R. Abernethy are deemed to beneficially own more than 10% of the issued and outstanding common stock of the Company by virtue of serving as co-executors of the Estate of Christine S. Abernethy, the Board of Directors has determined that neither Director J. Abernethy nor Director R. Abernethy are affiliates of the Company as defined in Rule 10A-3. As a result, the Board of Directors has determined that each member of the Audit Committee is independent as that term is defined in the applicable NASDAQ listing standards and the SEC’s regulations. The Board of Directors determines on an annual basis each director’s independence. In addition, the Board of Directors has determined that each member of the Audit Committee qualifies as an “audit committee financial expert” based on each of the member’s educational background and business experience.

 

The Audit Committee meets at least quarterly and, among other responsibilities, oversees (i) the independent auditing of the Company; (ii) the system of internal controls that management has established; and (iii) the quarterly and annual financial information to be provided to shareholders and the SEC. The Audit Committee met nine times during the year ended December 31, 2020.

 

 

The Compensation Committee has a written charter which is reviewed annually, and amended as needed, by the Compensation Committee. A copy of the Compensation Committee’s Charter is available on the Bank’s website (www.peoplesbanknc.com) under Investor Relations.

Compensation Committee Interlocks and Insider Participation. No member of the Compensation Committee is now, or formerly was, an officer or employee of the Company or the Bank. None of the named executive officers serve as a member of the board of directors of another entity whose executive officers or directors serve on the Company’s Board of Directors. See Indebtedness of and Transactions with Management and Directors starting on page 29 of this Proxy Statement.

 

Compensation Committee Report. The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis in this Proxy Statement with management and has recommended that it be included in this Proxy Statement and our Annual Report on Form 10-K filed with the SEC for the year ended December 31, 2020.

 

Compensation Committee

Robert C. Abernethy

James S. Abernethy

Douglas S. Howard

William Gregory Terry

Dan R. Timmerman, Sr., Committee Chair

 

Compensation Discussion and Analysis

 

The following Compensation Discussion and Analysis provides information with respect to the compensation paid during the year ended December 31, 2020 to our President and Chief Executive Officer, Lance A. Sellers, our former Chief Financial Officer, A. Joseph Lampron, Jr., our current Chief Financial Officer, Jeffrey Hooper, and William

 

D. Cable, Sr. (together, our “named executive officers”).

 

Elements of the Executive Compensation Program. The Company’s and the Bank’s compensation program consists of the following elements:

 

Base Salary. The salaries of our named executive officers are designed to provide a reasonable level of compensation that is affordable to the Company and fair to the executive. Salaries are reviewed annually, and adjustments, if any, are made based on the review of competitive salaries in our peer group, as well as an evaluation of the individual officer’s responsibilities, job scope, and individual performance. For example, we assess each officer’s success in achieving budgeted earnings and return ratios, business conduct and integrity, and leadership and team building skills.

 

Annual Cash Incentive Awards. We believe that annual cash incentive awards encourage our named executive officers to achieve short-term targets that are critical to achievement of our long-term strategic plan. The Bank has a Management Incentive Plan for officers of the Bank. Participants in the Management Incentive Plan are recommended annually by the President and Chief Executive Officer to the Bank’s Board of Directors. Each individual’s incentive pool is determined by a formula which links attainment of corporate budget with attainment of individual goals and objectives. Incentives under the Management Incentive Plan are paid annually. No named executive officer earned or was paid a cash incentive under the Management Incentive Plan during the fiscal year ended December 31, 2020.

 

 

 

 

 

Supplemental Executive Retirement Agreements. The Bank provides a non-qualified supplemental executive retirement benefit in the form of Amended and Restated Executive Salary Continuation Agreements with Messrs. Sellers, Lampron and Cable and an Executive Salary Continuation Agreement with Mr. Hooper. The Committee’s goal is to provide competitive retirement benefits given the restrictions on executives within tax-qualified plans. In prior years, the Compensation Committee worked with a compensation consultant in analyzing the possible benefits of using supplemental retirement benefits to address the issues of internal and external equity in terms of retirement benefits offered to all employees at the Company as a percentage of final average pay and executives in our peer group. In connection with the non-qualified supplemental executive retirement benefits, the Bank purchased life insurance contracts on the lives of the named executive officers. The increase in cash surrender value of the life insurance contracts constitutes the Bank’s contribution to the plan each year. The Bank will pay benefits to participating officers for a period between 13 years and the life of the officer. The Bank is the sole owner of all of the insurance contracts.

 

Profit Sharing Plan and 401(k) Plan. The Bank has a Profit Sharing Plan and 401(k) Plan for all eligible employees. The Bank made no contribution to the Profit Sharing Plan for the year ended December 31, 2020. No investments in Bank stock have been made by the plan. Under the Bank’s 401(k) Plan, the Bank matches employee contributions to a maximum of 4.00% of annual compensation. The Bank’s 2020 contribution to the 401(k) Plan pursuant to this formula was approximately $692,000. All contributions to the 401(k) Plan are tax deferred. The Profit Sharing Plan and 401(k) Plan permit participants to choose from investment funds which are selected by a committee

 

 

 

comprised of senior management. Employees are eligible to participate in both the 401(k) Plan and Profit Sharing Plan beginning in the second month of employment. Both plans are now “safe harbor” plans, and all participants are immediately 100% vested in all employer contributions.  

The Compensation Committee did not engage a compensation consultant during the year ended December 31, 2020. The President and Chief Executive Officer of the Company and the Bank makes recommendations to the Committee regarding the compensation of the executive officers other than his own. The President and Chief Executive Officer participates in the deliberations, but not in the decisions, of the Compensation Committee regarding compensation of executive officers. He does not participate in the Compensation Committee’s discussion or decisions regarding his own compensation. The Compensation Committee reports its actions to the Board of Directors and keeps written minutes of its meetings, which minutes are maintained with the books and records of the Company.

 

The Compensation Committee also considers the results of the shareholders’ non-binding vote on executive compensation. At the 2019 Annual Meeting of Shareholders, 57.78% of the shareholders who voted at the 2019 Annual Meeting of Shareholders elected to review the executive compensation of the Company’s named executive officers once every three years. As such, The Company will submit a vote to the shareholders on the compensation of its named executive officers at the 2022 Annual Meeting of Shareholders. At the 2019 Annual Meeting of Shareholders, 85.40% of the Shareholders who voted at the 2019 Annual Meeting of Shareholders approved the executive compensation of the Company’s named executive officers as presented in the 2019 proxy statement.

 

2020 Compensation Disclosure Ratio of the Median Annual Total Compensation of All Company Employees to the Annual Total Compensation of the Company’s Chief Executive Officer

 

We believe our executive compensation program must be consistent and internally equitable to motivate our employees to perform in ways that enhance shareholder value. We are committed to internal pay equity, and the Compensation Committee monitors the relationship between the pay of our executive officers and the pay of our non-

 

executive employees.  The Compensation Committee reviewed a comparison of our Chief Executive Officer’s annual total compensation in fiscal year 2020 to that of all other Company employees (including all employees of the Bank) for the same period.  The calculation of annual total compensation of all employees was determined in the same manner as the “Total Compensation” shown for our Chief Executive Officer in the “Summary Compensation Table” on page 22 of this Proxy Statement. 

 

Summary Compensation Table

 

The named executive officers of the Company are not paid any cash compensation by the Company. However, the named executive officers of the Company also are executive officers of the Bank and receive compensation from the Bank. The below tables show, for the fiscal years ended December 31, 2020, 2019 and 2018, the cash compensation received by, as well as certain other compensation paid or accrued for those years, to each named executive officer.

 

SUMMARY COMPENSATION TABLE

 

Name and Principal Position		Year	Salary($)	Bonus($)	Stock Awards($)3	Change in Pension Value and Nonqualified Deferred Compensation Earnings($)	All Other Compensation($)4	Total($)
Lance A. Sellers		2020	346,988	60,000	-	80,506	26,241	513,735
President and Chief Executive		2019	336,980	115,000	-	74,098	26,179	552,257
Officer		2018	328,760	90,000	-	68,064	30,454	517,278
A. Joseph Lampron, Jr.1		2020	132,327	-	-	-	18,506	150,833
Former Executive Vice President,		2019	216,309	150,000	-	25,658	24,802	416,769
Chief Financial Officer		2018	210,009	55,000	-	120,772	22,224	408,005
Jeffrey Hooper2		2020	152,712	74,0002	-	7,439	8,801	242,953
Executive Vice President and Chief Financial Officer
William D. Cable, Sr.		2020	233,879	40,000	-	31,820	29,685	335,384
Executive Vice President,		2019	228,174	55,000	40,086	29,227	25,081	377,568
Chief Operating Officer		2018	216,125	50,000	-	26,837	24,365	317,327

 _____________

1 Mr. Lampron retired from the Company and the Bank on June 30, 2020. As such, his compensation reflects amount received, paid or accrued from January 1, 2020 through June 30, 2020.

2 Mr. Hooper was hired by the Company on March 2, 2020. As such, his compensation reflects amount received, paid or accrued from March 2, 2020 through December 31, 2020. Includes a $34,000 signing bonus and a $40,000 year-end annual discretionary bonus.

3 Amount represents the aggregate grant date fair value computed in accordance with FASB ASC Topic 718. See Note 1 in the Notes to the Company’s Consolidated Financial Statements included in the Company’s Annual Report, which Annual Report is attached here to as Appendix A.

4 All other compensation is comprised of the following:

 

Name and Principal Position		Year	Employer Match($)	Car Allowance($)	Country Club Dues($)	Split Dollar Death Benefit($)	Group Term Life($)(a)	Disability and LTC Premiums($)(b)	Dividends Accrued on Restricted Stock Units($)	Other($)
Lance A. Sellers		2020	11,400	1,610	3,960	587	2,290	6,150	244	0
President and Chief		2019	11,200	1,872	3,825	570	1,548	5,894	1,270	0
Executive Officer		2018	11,000	2,888	3,730	539	2,899	5,628	1,270	2,500(c)
A. Joseph Lampron, Jr.(d)		2020	10,992	0	1,830	1,570	2,918	1,012	183	0
Former Executive Vice		2019	11,200	0	3,660	1,464	5,626	1,900	952	0
President, Chief Financial Officer		2018	10,610	0	3,630	1,359	3,688	1,984	953	0
Jeffrey Hooper(e) Executive Vice President, Chief Financial Officer		2020	5,568	0	2,695	95	443	0	183	0
William D. Cable, Sr.,		2020	11,327	0	3,780	527	1,122	8,207	973	3,750(f)
Executive Vice President		2019	11,118	0	3,780	496	1,047	7,688	952	0
Chief Operating Officer		2018	10,795	0	3,730	463	2.050	6,375	952	0

 

__________

(a)Represents amounts paid by the Bank for premiums on group term life insurance in excess of $50,000 for each named executive officer.

(b)Represents amounts paid by the Bank for premiums on disability and long-term care insurance for each named executive officer.

(c)In 2018, Mr. Sellers received 68 shares for 20 years of service with the Bank and $528 in cash to pay taxes associated with the award under the Bank’s Service Recognition Program.

(d)Mr. Lampron retired from the Company and the Bank on June 30, 2020. As such, his compensation reflects amount received, paid or accrued from January 1, 2020 through June 30, 2020.

(e) Mr. Hooper was hired by the Company on March 2, 2020. As such, his compensation reflects amount received, paid or accrued from March 2, 2020 through December 31, 2020.

(f)In 2020, Mr. Cable received 121 shares for 25 years of service with the Bank and $750 in cash to pay taxes associated with the award under the Bank’s Service Recognition Program.

 

Grants of Plan-Based AwardsGrants of Plan-Based Awards

The Company did not grant any plan-based awards to Messrs. Sellers, Lampron, and Cable during the fiscal year ended December 31, 2020. The following table shows certain information for those grants of plan-based awards that we made to Mr. Hooper during the fiscal year ended December 31, 2020.

 

GRANTS OF PLAN-BASED AWARDS TABLE

Name		Grant Date	Estimated Future Payouts Under Equity Incentive Plan Awards		All Other Stock Awards:Numberof Sharesof Stockor Units (#)	All Other Option Awards: Number of Securities Under- lying Options (#)	Exercise or Base Price of Option Awards ($/Sh)	Grant Date Fair Value of Stock and Option Awards ($)
		Threshold (#)	Target (#)	Maximum (#)
Jeffrey N. Hooper		May 7, 2020	--	--	1,760(1)	--	--	17.08(2)

____________________________________

(1) Restricted stock units vest in full on May 7, 2024

(2) Represents fair market value per share on May 7, 2024

 

Outstanding Equity Awards at Fiscal Year End

Messrs. Sellers and Lampron did not have any outstanding equity awards at December 31, 2020. The following table shows certain information for those outstanding equity awards at December 31, 2020 for Messrs. Cable and Hooper.

OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END TABLE

	Stock Awards
Name	Number of Shares or Units of Stock That Have Not Vested (#)	Market Value of Shares or Units of Stock That Have Not Vested ($)	Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#)	Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested(3) ($)
William D. Cable, Sr.	--	--	1,410(1)	46,319
Jeffrey N. Hooper	--	--	1,760(2)	40,515

______________________________________

 

Option Exercises and Stock Vested

 

During the fiscal year ended December 31, 2020, no options were exercised by the named executive officers and no restricted stock units granted to the named executive officers vested.

 

Pension Benefits

 

The following table shows, for the fiscal year ended December 31, 2020, the pension benefits paid or earned by Messrs. Sellers, Lampron, Hooper, and Cable.

PENSION BENEFITS TABLE
Name		Plan Name	Number of Years Credited Service	Present Value of Accumulated Benefit($)	Payments During Last Fiscal Year($)
Lance A. Sellers		Amended and Restated Executive Salary Continuation Agreement1	19	655,775	--
A. Joseph Lampron, Jr.		Amended and Restated Executive Salary Continuation Agreement1,2	19	784,162	--
Jeffrey N. Hooper		Executive Salary Continuation Agreement3	1	7,439	--
William D. Cable, Sr.		Amended and Restated Executive Salary Continuation Agreement1	19	217,817	--

_______________________

1 The Bank entered into Amended and Restated Executive Salary Continuation Agreement with Messrs. Sellers, Lampron and Cable effective on December 18, 2008. The Amended and Restated Executive Salary Continuation Agreements for Messrs. Sellers, Lampron and Cable were further amended on December 10, 2014, and such amendments were memorialized in a First Amendment to the Amended and Restated Executive Salary Continuation Agreements effective February 16, 2018. Unless a separation from service or a change in control (as defined in the Amended and Restated Executive Salary Continuation Agreements) occurs before the retirement age set forth in each Amended and Restated Executive Salary Continuation Agreement, the Amended and Restated Executive Salary Continuation Agreements provide for an annual supplemental retirement benefit to be paid to each of the named executive officers in 12 equal monthly installments payable on the first day of each month, beginning with the month immediately after the month in which the named executive officer attains the normal retirement age and for the named executive officer’s lifetime, or if longer, a 13-year term. Under the terms of the Amended and Restated Executive Salary Continuation Agreements, Mr. Sellers will receive an annual supplemental retirement benefit of $130,495, Mr. Lampron will receive an annual supplemental retirement benefit of $76,554 and Mr. Cable will receive an annual supplemental retirement benefit of $93,872.

2 Mr. Lampron retired on June 30, 2020 and beginning in January of 2021 will begin drawing 100% of the annual benefit of $76,554.

3 The Bank entered into an Executive Salary Continuation Agreement with Mr. Hooper effective on July 1, 2020. Unless a separation from service or a change in control (as defined in Mr. Hooper’s Executive Salary Continuation Agreement) occurs before the retirement age set forth in his Executive Salary Continuation Agreement, the Executive Salary Continuation Agreement provides for an annual supplemental retirement benefit to be paid to Mr. Hooper in 12 equal monthly installments payable on the first day of each month, beginning with the month immediately after the month in which he attains the normal retirement age and for a 13-year term. Under the terms of the Executive Salary Continuation Agreement, Mr. Hooper will receive an annual supplemental retirement benefit of $45,000.  

  

 

Nonqualified Deferred Compensation

 

The below table shows the compensation deferred by Messrs. Lampron and Cable during the year ended December 31, 2020. Mr. Sellers and Mr. Hooper elected not to defer any portion of their compensation during the year ended December 31, 2020.

 

                    NONQUALIFIED DEFERRED COMPENSATION TABLE

 

Name	Executive Contributions in the Last FY ($)(1)	Registrant Contributions In Last FY ($)	Aggregate Earnings in Last FY ($)(2)	Aggregate Withdrawals/ Distributions ($)	Aggregate Balance at Last FYE ($)(3)
A. Joseph Lampron, Jr.	$10,815	--	$(79,662)	0	$229,748
William D. Cable, Sr.	$17,809	--	$(105,677)	0	$572,924

___________________

 

Employment Agreements

 

On January 22, 2015, the Company, the Bank and each of (i) Lance A. Sellers, the President and Chief Executive Officer of the Company and the Bank and (ii) William D. Cable, Sr., Executive Vice President and Chief Operating Officer of the Bank and Executive Vice President, Assistant Corporate Treasurer and Assistant Corporate Secretary of the Company executed an Employment Agreement which replaced and superseded such executive’s prior employment agreement (collectively, the “Employment Agreements”). Jeffrey N. Hooper, the Executive Vice President and Chief Financial Officer of the Company and Executive Vice President, Chief Financial Officer, Corporate Treasurer and Assistant Corporate Secretary of the Bank does not have an employment agreement with the Company or the Bank. On January 22, 2015, the Company and the Bank also entered into an employment agreement with A. Joseph Lampron, Jr., the former Executive Vice President and Chief Financial Officer of the Bank and the former Executive Vice President, Chief Financial Officer and Corporate Treasurer of the Company (“Mr. Lampron’s Employment Agreement”). Mr. Lampron’s Employment Agreement ended upon his retirement from the Company and the Bank on June 30, 2020.

 

Each Employment Agreement provides for an initial term of 36 months beginning on January 22, 2015 (the “Effective Date”). On the first anniversary of the Effective Date and on each anniversary thereafter (the “Renewal Date”), each Employment Agreement shall be extended automatically for one additional year unless the Board of Directors of the Company or the executive determines, and prior to the Renewal Date sends to the other party written notice, that the term shall not be extended. If the Board of Directors of the Company decides not to extend the term, the Employment Agreement shall nevertheless remain in force until its existing term expires. Under the Employment Agreements, the Bank will pay Mr. Sellers a base salary at the rate of at least $311,400 per year and Mr. Cable a base salary at the rate of at least $198,750 per year. The Bank will review each executive’s total compensation at least annually and in its sole discretion may adjust an executive’s total compensation from year to year, but during the term of the Employment Agreement, Mr. Sellers’s base salary may not decrease below $311,400 and Mr. Cable’s base salary may not decrease below $198,750; provided, however, that periodic increases in base salary, once granted, may not be subject to revocation. In addition, the Employment Agreements provide for discretionary bonuses and participation in other management incentive, pension, profit-sharing, medical and retirement plans maintained by the Bank, as well as fringe benefits normally associated with such executive’s office.

 

 

Under the Employment Agreements, each executive’s employment will terminate automatically upon death. Otherwise, the Company and the Bank may terminate each executive’s employment for “cause”, “without cause” or in the event of a “disability” (each as defined in the Employment Agreements). In addition, each executive may voluntarily terminate his employment upon 60 days prior written notice to the Company and the Bank or for “good reason” (as defined in the Employment Agreement). Under the Employment Agreements, if the Company and the Bank terminate an executive’s employment “without cause”, or an executive terminates his employment for “good reason”, in each case, other than in connection with a change of control, then in each case, the executive would be entitled to receive certain severance payments and access to welfare benefit plans as more particularly set forth in the Employment Agreements. Under the Employment Agreements, in the event that the Company and the Bank terminate an executive’s employment “without cause”, or an executive terminates his employment for “good reason”, in any such case at the time of or within one year after a Change of Control, then the executive will be entitled to receive certain change in control payments as more particularly set forth in the Employment Agreements.

 

In addition, each Employment Agreement contains certain restrictive covenants prohibiting the executive from competing against the Company and the Bank or soliciting the Company’s or the Bank’s customers for a period of time following termination of employment, all as more particularly set forth in the Employment Agreements.

 

Potential Payments upon Termination or Change in Control

 

Each of the Employment Agreements provide that in the event the Company terminates the employment of a named executive officers “without cause” (as defined in the Employment Agreements), or the officer terminates his or her employment for “good reason” (as defined in the Employment Agreements), in any such case during the employment and at the time of or within one year after a “change of control” (as defined in the Employment Agreements), the officer will be entitled to receive the following payments and benefits: (1) the Company will pay the officer the aggregate of the following amounts: (a) the sum of his accrued obligations; (b) the greater of his base salary, divided by 365 and multiplied by the number of days remaining in the employment period, or an amount equal to 2.99 times his base salary; and (c) the product of his aggregate cash bonus for the last completed fiscal year, and a fraction, the numerator of which is the number of days in the current fiscal year through the date of termination, and the denominator of which is 365; (2) all restricted stock or restricted stock unit awards previously granted to the executive and which have not already become vested and released from restrictions on transfer, repurchase and forfeiture rights, either as a result of the change of control or otherwise, shall immediately vest and be released from such restrictions as of the change of control termination date; and (3) all options previously granted to the officer that are unvested as of the change of control termination date will be deemed vested, fully exercisable and non-forfeitable as of the change of control termination date (other than transfer restrictions applicable to incentive stock options) and all previously granted options that are vested, but unexercised, on the change of control termination date will remain exercisable, in each case for the period during which they would have been exercisable absent the termination of his employment, except as otherwise specifically provided by the Internal Revenue Code;and (4) his benefits under all benefit plans that are non-qualified plans will be 100% vested, regardless of his age or years of service, as of the change of control termination date.

 

If the named executive officers were terminated on December 31, 2020, “without cause” or for “good reason” at the time of or within one year after a “change of control”, Mr. Sellers and Mr. Cable would have been entitled to receive compensation of approximately $1,220,963 and $821,636, respectively, pursuant to their Employment Agreements. These amounts are calculated based on each officer’s 2020 “Salary” and “Bonus” as shown in the “Summary Compensation Table” on page 22 of this Proxy Statement. In addition, if a “change in control” (as defined in the 2009 Omnibus Plan, or in the case Mr. Hooper, the 2020 Omnibus Plan) had occurred on December 31, 2020, all unvested restricted stock units previously granted to each of Mr. Cable and Mr. Hooper would have vested immediately. On December 31, 2020, these unvested restricted stock units had a fair market value of $32,458 for Mr. Cable and $40,515 for Mr. Hooper. Neither Mr. Sellers nor Mr. Lampron had outstanding restricted stock units at December 31, 2020. Neither Mr. Lampron nor Mr. Hooper would have been entitled to receive a severance payment on December 31, 2020.

  

 

Omnibus Stock Option and Long Term Incentive Plan

 

General. The purpose of the 2020 Omnibus Plan is to promote the interests of the Company by attracting and retaining directors and employees of outstanding ability and to provide executive and other key employees of the Company and its subsidiaries greater incentive to make material contributions to the success of the Company by providing them with stock-based compensation which will increase in value based upon the market performance of the common stock and/or the corporate achievement of financial and other performance objectives. 

 

The 2020 Omnibus Plan is administered by the Governance Committee of the Board of Directors (the “Committee”).  Subject to the terms of the 2020 Omnibus Plan, the Committee and the Board of Directors have authority to construe and interpret, for eligible employees and eligible directors, respectively, the 2020 Omnibus Plan, to determine the terms and provisions of Rights (as defined below) to be granted under the 2020 Omnibus Plan, to define the terms used in the 2020 Omnibus Plan and in the Rights granted thereunder, to prescribe, amend and rescind rules and regulations relating to the 2020 Omnibus Plan, to determine the individuals to whom and the times at which Rights shall be granted and the number of shares to be subject to, or to underlie, each Right awarded, and to make all other determinations necessary or advisable for the administration of the 2020 Omnibus Plan.

 

Rights Which May Be Granted.  Under the 2020 Omnibus Plan, the Committee may grant or award eligible participants options, rights to receive restricted shares of common stock, long term incentive units (each equivalent to one share of common stock), and/or stock appreciation rights. These grants and awards are referred to herein as the “Rights.”  If approved by the shareholders at the Annual Meeting, all Rights must be granted or awarded by May 7, 2029, the tenth anniversary of the date the shareholders approve the 2020 Omnibus Plan.  The Board of Directors has provided for 300,000 shares of the Company’s common stock be included in the 2020 Omnibus Plan to underlie Rights which may be granted thereunder. Any shares of common stock allocated to Rights granted under the 2020 Omnibus Plan, which Rights are subsequently cancelled or forfeited, will be available for further allocation upon such cancellation or forfeiture.

 

Change in Control. In the event of a change in control (as such term is defined in the 2020 Omnibus Plan), all Rights under the 2020 Omnibus Plan will fully vest and be released from any restrictions on transfer. In addition, in the event of a change in control, the Committee may, with 10 days’ advance notice to affected persons, cancel any Right and pay to the holders thereof in cash or common stock or both, the value of the Right based upon the price per share of common stock received or to be received by the Company’s shareholders in the change in control.

 

Clawback. The Company may cancel any Right, require reimbursement of any Right or previously paid compensation under the Plan or an award agreement, or use any other right of recoupment of equity or compensation in accordance with any clawback policy adopted by the Company and as may be in effect from time to time.

 

Grants. On May 7, 2020, the Board of Directors granted 7,635 non-transferable restricted stock units in the aggregate to employees pursuant to the 2020 Omnibus Stock Ownership and Long Term Incentive Plan. All grants were compensatory in nature and were issued without cost to the employees. Each restricted stock unit is subject to time-based vesting restrictions and once vested will be convertible into one share of the Company’s common stock.

 

Director Compensation

Directors’ Fees. Members of the Company’s Board of Directors receive no fees or compensation for their service. However, all members of the Board of Directors are also directors of the Bank and are compensated for that service.

 

During the year ended December 31, 2020, each director received a fee of $1,200 for each Bank Board of Directors meeting attended, an additional fee of $750 for each committee meeting attended and a retainer of $15,000. In addition, the Chairman of the Bank’s Board of Directors received an additional $250 per meeting attended and the chairpersons of each committee received an additional $150 per meeting attended. Directors receive $500 for special meetings held via conference call in lieu of the Board of Director and committee meeting fees set forth above.

 

 

 

The Bank maintains a Service Recognition Program, under which directors, officers and employees are eligible for awards. Under the Service Recognition Program, directors, officers and employees are awarded a combination of common stock of the Company and cash in the amount necessary to pay taxes on the award, with the amount of the award based upon the length of service to the Bank. Any common stock awarded under the Service Recognition Program is purchased by the Bank on the open market, and no new shares are issued by the Company under the Service Recognition Program.

 

Directors’ Stock Benefits Plan. Members of the Board of Directors were eligible to participate in the 2009 Omnibus Plan. On March 22, 2012, the Company granted 891 Restricted Stock Units, each Restricted Stock Unit being comprised of the right to receive one share of the Company’s common stock, to each director. The Restricted Stock Units awarded to directors on March 22, 2012 vested in full on March 22, 2017, and upon vesting, each Restricted Stock Unit had a market value of $25.91 for a total value of $23,085, which was distributed to each director in a combination of stock or cash, as chosen by each director. On May 23, 2013, the Company granted 891 Restricted Stock Units, each Restricted Stock Unit being comprised of the right to receive one share of the Company’s common stock, to each director. The Restricted Stock Units awarded to directors on May 23, 2013 vested in full on May 23, 2017, and upon vesting, each Restricted Stock Unit had a market value of $24.94 for a total value of $22,218, which was distributed to each director in a combination of stock or cash, as chosen by each director. On February 20, 2014, the Company granted 715 Restricted Stock Units, each Restricted Stock Unit being comprised of the right to receive one share of the Company’s common stock, to each director. The Restricted Stock Units awarded to directors on February 20, 2014 vested in full on February 20, 2017, and upon vesting, each Restricted Stock Unit had a market value of $24.78 for a total value of $17,719, which was distributed to each director in a combination of stock or cash, as chosen by each director. On February 19, 2015, the Company granted 413 Restricted Stock Units, each unit being comprised of the right to receive one share of the Company’s common stock, to each director. The Restricted Stock Units awarded to directors on February 19, 2015 vested in full on February 19, 2019, and upon vesting, each Restricted Stock Unit had a market value of $28.07 for a total value of $11,593, which was distributed to each director in a combination of stock or cash, as chosen by each director. The number of Restricted Stock Units described above have been restated to reflect the 10% stock dividend issued in December, 2017. The Company did not grant any plan-based awards to directors during the fiscal year ended December 31, 2020.

 

 Directors’ Deferred Compensation Plan. The Bank maintains a non-qualified deferred compensation plan for all of its directors. The Bank’s directors are also directors of the Company. Under the deferred compensation plan, each director may defer all or a portion of his fees to the plan each year. The director may elect to invest the deferred compensation in a restricted list of investment funds. The Bank may make matching contributions to the plan for the benefit of the director from time to time at the discretion of the Bank. Directors are fully vested in all amounts they contribute to the plan and in any amounts contributed by the Bank. The Bank has established a Rabbi Trust to hold the directors’ accrued benefits under the plan. There are no “above-market” returns provided for in the deferred compensation plan. The Bank made no contributions to this plan in 2020.

 

Benefits under the plan are payable in the event of the director’s death, resignation, removal, failure to be re-elected, retirement or in cases of hardship. Directors may elect to receive deferred compensation payments in one lump sum or in installments.

 

Directors’ Supplemental Retirement Plan. The Bank maintains a non-qualified supplemental retirement benefits plan for all its directors. The supplemental retirement benefits plan is designed to provide a retirement benefit to the directors while at the same time minimizing the financial impact on the Bank’s earnings. Under the supplemental retirement benefits plan, the Company purchased life insurance contracts on the lives of each director. The increase in cash surrender value of the contracts constitutes the Company’s contribution to the supplemental retirement benefits plan each year. The Bank will pay annual benefits to each director for 15 years beginning upon retirement from the Board of Directors. The Bank is the sole owner of all of the insurance contracts.

 

 

The following table reports all forms of compensation paid to or accrued for the benefit of each director during the 2020 fiscal year.

Name	Fees Earned or Paid in Cash ($)	Stock Awards1 ($)	Option Awards ($)	Non-Equity Incentive Plan Compensation ($)	Change in Pension Value and Nonqualified Deferred Compensation Earnings2 ($)	All Other Compensation ($)3	Total ($)
James S. Abernethy	38,900	--	--	--	9,535	--	48,435
Robert C. Abernethy	42,450	--	--	--	5,642	--	48,092
Douglas S. Howard	38,900	--	--	--	5,919	--	44,819
John W. Lineberger, Jr.	30,900	--	--	--	6,625	--	37,525
Gary E. Matthews	30,900	--	--	--	8,645	--	39,545
Billy L. Price, Jr., M.D.	38,000	--	--	--	7,819	--	45,819
Larry E. Robinson	30,900	--	--	--	6,625	--	37,525
William Gregory Terry	33,150	--	--	--	2,897	--	36,047
Dan Ray Timmerman, Sr.	39,200	--	--	--	6,625	3,750	49,575
Benjamin I. Zachary	36,650	--	--	--	7,853	3,750	48,253

_________________________

 

Indebtedness of and Transactions with Management and Directors

 

The Company is a “listed issuer” under the rules and regulations of the Exchange Act whose common stock is listed on NASDAQ. The Company uses the definition of independence contained in NASDAQ’s listing standards to determine the independence of its directors and that the Board of Directors and each standing committee of the Board of Directors is in compliance with NASDAQ listing standards for independence.

 

Certain directors and executive officers of the Bank and their immediate families and associates were customers of and had transactions with the Bank in the ordinary course of business during 2020. All outstanding loans, extensions of credit or overdrafts, endorsements and guarantees outstanding at any time during 2020 to the Bank’s executive officers and directors and their family members were made in the ordinary course of its business. These loans are currently made on substantially the same terms, including interest rates and collateral, as those then prevailing for comparable transactions with persons not related to the lender, and did not involve more than the normal risk of collectability or present any other unfavorable features.

The Board of Directors routinely, and no less than annually, reviews all transactions, direct and indirect, between the Company or the Bank and any employee or director, or any of such person’s immediate family members. The standard applied to such transactions are to review such transactions for comparable market values for similar transactions. All material facts of the transactions and the director’s interest are discussed by all disinterested directors and a decision is made about whether the transaction is fair to the Company and the Bank. A majority vote of all disinterested directors is required to approve the transaction. See “Code of Business Conduct and Ethics” on page 14 of this Proxy Statement.

 

 

The Bank leased two of its facilities from Shortgrass Associates, L.L.C. (“Shortgrass”) during 2020, and in September of 2020, the Bank purchased both of these properties from Shortgrass Associates, L.L.C. Director John W. Lineberger, Jr. owns 25% of the membership interests in Shortgrass. Each of the facilities was subject to a 20-year lease between the Bank and Shortgrass. Pursuant to the terms of the leases for the two facilities leased by the Bank, during 2020 the Bank paid a total of $173,194 to Shortgrass in lease payments for these facilities, and the dollar value of Director John W. Lineberger, Jr.’s interest in such lease payments was approximately $43,299 (or 25% x $173,194). The gross sales price for these properties was $1 million. The properties were subject to a first mortgage of $492,550, which was satisfied from the proceeds of the sale. Director Lineberger’s interest in the net proceeds from the sale of the properties was approximately $126,862 (or 25% x ($1,000,000 - $492,550)).

 

The Board of Directors also evaluates the influence family relationships may have on the independence of directors who are related by blood or marriage. Directors Robert C. Abernethy (Chairman of the Board) and James S. Abernethy (Vice Chairman of the Board) are brothers and serve as co-executors of the Estate of Christine S. Abernethy, a greater than ten percent (10%) shareholder of the Company. As a result of serving as co-executors of the Estate of Christine S. Abernethy, Directors R. Abernethy and J. Abernethy are deemed to beneficially own more than 10% of the issued and outstanding common stock of the Company. All of the non-related directors have determined that neither the family relationships among James S. Abernethy and Robert C. Abernethy nor their beneficial ownership of greater than ten percent (10%) of the Company’s common stock, affect the brothers’ independence as directors.

 

 

 

 

 

 

 

Equity Compensation Plan Information

 

 

Plan Category	Number of securities to be issued upon exercise of outstanding option, warrants and rights (1), (2), (3), (4) and (5)	Weighted-average exercise price of outstanding options, warrants and rights (6)	Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))
	(a)	(b)	(c)
Equity compensation plans approved by security holders	25,868	-	292,365
Equity compensation plans not approved by security holders	-	-	-
Total	25,868	-	292,365

 

(1) Includes 5,104 restricted stock units (adjusted for the 10% stock dividend granted in December of 2017) granted on February 18, 2016 under the 2009 Omnibus Plan. These restricted stock grants vested on February 18 2020.

 

(2) Includes 4,114 restricted stock units (adjusted for the 10% stock dividend granted in December of 2017) granted on March 1, 2017 under the 2009 Omnibus Plan. The restricted stock grants vest on March 1, 2021.

 

(3) Includes 3,725 restricted stock units granted on January 24, 2018 under the 2009 Omnibus Plan. These restricted stock units vest on January 24, 2022.

 

(4) Includes 5,290 restricted stock units granted on February 21, 2019 under the 2009 Omnibus Plan. These restricted stock units vest on February 21, 2023.

 

(5) Includes 7,635 restricted stock units granted on May 7, 2020 under the 2020 Omnibus Plan. These restricted stock grants vest on May 7, 2024.

 

(6) The restricted stock units granted by the Company under the 2009 Omnibus Plan and the 2020 Omnibus Plan do not have an exercise price.

 

The above table excludes shares to be awarded pursuant to the Service Recognition Program. The Service Recognition Program is described under the section captioned “Discretionary Bonus and Service Awards” on page 19 of this Proxy Statement.

 

 

 

STOCK PERFORMANCE GRAPH

 

 

 

PROPOSAL 2

AMENDMENT TO ARTICLES OF INCORPORATION TO IMPLEMENT A MAJORITY VOTING

STANDARD IN UNCONTESTED ELECTIONS OF DIRECTORS

The Board of Directors has adopted and recommends that the shareholders approve an amendment (the “Amendment”) to the Company’s Articles of Incorporation, as amended, to implement a majority voting standard for the election of directors in uncontested elections. Appendix B attached to this Proxy Statement, shows the changes to the Articles of Incorporation if the Amendment is approved. If approved by the shareholders, the Amendment will be applicable to elections of directors occurring subsequent to the 2021 Annual Meeting of Shareholders.

The North Carolina Business Corporation Act (the “Act”) Section 55-7-28(a) provides that, unless otherwise specified in a corporation’s Articles of Incorporation or in a shareholders’ agreement valid under Section 55-7-31 of the Act, directors are elected by a plurality of the votes cast by the shareholders entitled to vote at a meeting at which a quorum is present. The Company’s Articles of Incorporation do not currently specify the voting standard required in director elections, but the Company’s Bylaws reflect that directors are elected by a plurality vote, as set forth in the Act. Under the plurality voting standard currently used by the Company, the director nominees who receive the greatest number of votes “for” election are elected.

In recent years, shareholders of public corporations have expressed concern that allowing plurality voting in uncontested elections of directors can result in directors being elected when there are more votes cast “against” their election than are cast “for” their election. As a result, shareholders have urged that companies amend their governing documents to provide that a majority vote standard be used in uncontested director elections, which are defined as elections when the number of director nominees does not exceed the number of directors to be elected. Use of a majority voting standard in uncontested elections would mean that a director nominee would be elected only if the votes cast “for” the nominee’s election exceed the votes cast “against” the nominee’s election. Shareholders would also be entitled to abstain with respect to the election of a director, but abstentions would not affect the determination of whether the required majority vote is obtained.

After careful consideration of the issues described above, the Company’s Board of Directors has determined that it is in the best interests of the Company and its shareholders to provide for majority voting in uncontested director elections. The Board of Directors believes that the existing plurality vote standard should continue to apply in contested director elections, which are defined as elections when there are more director nominees than the number of directors to be elected. Using a majority vote standard in a contested election could result in the election of fewer nominees than the number of authorized board seats to be filled. Therefore, the proposed Amendment provides for majority voting in uncontested director elections and retains plurality voting in contested director elections. If the Amendment is approved by the shareholders, it will supersede conflicting provisions in the Company’s Bylaws. However, if the Amendment is approved by the Shareholders, the Board of Directors intends to amend the Company’s Bylaws to eliminate the inconsistency that will then exist between the Bylaws and the Amendment.

Pursuant to Section 55-8-05(a) of the Act and the Company’s Bylaws, an incumbent director who is not re-elected remains in office and becomes a “holdover director” until the director’s successor is elected and qualifies or until there is a decrease in the number of authorized directors on the Board. To address the possibility that the Company could have such a holdover director, if the Amendment is approved by the shareholders, the Board of Directors intends to adopt a Director Resignation Policy. The Director Resignation Policy provides that if any director nominee in an uncontested election receives more “against” votes than “for” votes, the director nominee is required to submit his or her resignation to the Board of Directors. The Governance Committee of the Board (excluding the nominee in question) or, under circumstances described in the Director Resignation Policy a special committee appointed by the Board of Directors, will then consider the resignation offer and make a recommendation to the Board of Directors as to whether to accept or reject the tendered resignation. The Board of Directors (excluding the nominee in question) must make a final determination as to whether to accept the director’s resignation. The Director Resignation Policy will continue in effect until amended or terminated by the Board of Directors.

 

THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE APPROVAL OF THE PROPOSED AMENDMENT TO THE COMPANY’S ARTICLES OF INCORPORATION. 

PROPOSAL 3

RATIFICATION OF SELECTION OF INDEPENDENT REGISTERED PUBLIC

ACCOUNTING FIRM

 

Elliott Davis, our registered independent public accounting firm for the fiscal year ended December 31, 2020, has been appointed by the Audit Committee as our registered independent public accounting firm for the fiscal year ending December 31, 2021, and you are being asked to ratify this appointment. Fees charged by this firm are at rates and upon terms that are customarily charged by other registered independent public accounting firms. A representative of the firm will be present at the Annual Meeting and will have an opportunity to make a statement if he or she desires to do so and to respond to appropriate questions.

 

Audit Fees Paid to Independent AuditorsAudit Fees Paid to Independent Auditors

 

The following table represents the approximate fees for professional services rendered by Elliott Davis for the audit of our annual financial statements and review of our financial statements included in our Forms 10-Q for the fiscal years ended December 31, 2020 and 2019 and fees billed for audit-related services, tax services and all other services rendered, for each of such years.

 

	Year Ended December 31
	2020	2019
Audit Fees1	$182,383	$202,445
Audit-Related Fees2	$12,500	$12,660
Tax Fees3	$29,950	$25,750
All Other Fees	--	--

__________________________

1 For the fiscal year ending December 31, 2020, includes amounts for the testing of management’s assertions regarding internal controls in accordance with the Federal Deposit Insurance Corporation Improvement Act. For the fiscal year ending December 31, 2019, audit fees include amounts for the integrated audit of the consolidated financial statements and internal control over financial reporting (Sarbanes-Oxley Section 404) and for the testing of management's assertions regarding internal controls in accordance with the Federal Deposit Insurance Corporation Improvement Act.

2 Represents amounts for the audit of the Company’s Profit Sharing and 401(k) Plan.

3 Represents amounts for assistance in the preparation of our various federal, state and local tax returns.

 

All audit related services, tax services and other services giving rise to the fees listed under “Audit-Related Fees”, “Tax Fees” and “All Other Fees” in the table above were pre-approved by the Audit Committee, which concluded that the provision of such services was compatible with the maintenance of that firm’s independence in the conduct of its auditing functions. The Audit Committee’s Charter provides for pre-approval of all audit and non-audit services to be provided by our independent auditors. The Charter authorizes the Audit Committee to delegate to one or more of its members pre-approval authority with respect to permitted services, provided that any such approvals are presented to the Audit Committee at its next scheduled meeting.

 

THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR RATIFICATION OF THE APPOINTMENT OF ELLIOTT DAVIS AS THE COMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE FISCAL YEAR ENDING DECEMBER 31, 2021.

 

 

 

 

In the alternative, a shareholder may commence his or her own proxy solicitation and present a proposal from the floor at the 2022 Annual Meeting of Shareholders of the Company. In order to do so, the shareholder must notify the Secretary of the Company in writing, at the Company’s principal executive office no later than February 8, 2022, of his or her proposal. If the Secretary of the Company is not notified of the shareholder’s proposal by February 8, 2022, the Board of Directors may vote on the proposal pursuant to the discretionary authority granted by the proxies solicited by the Board of Directors for the 2022 Annual Meeting of Shareholders.

 

OTHER MATTERS

 

Management knows of no other matters to be presented for consideration at the Annual Meeting or any adjournments thereof. If any other matters shall properly come before the Annual Meeting, it is intended that the proxyholders named in the enclosed form of proxy will vote the shares represented thereby in accordance with their judgment, pursuant to the discretionary authority granted therein.

 

MISCELLANEOUS

 

The Annual Report of the Company for the year ended December 31, 2020, which includes financial statements audited and reported upon by the Company’s registered independent public accounting firm, is being mailed as Appendix A to this Proxy Statement; however, it is not intended that the Annual Report be deemed a part of this Proxy Statement or a solicitation of proxies.

 

THE FORM 10-K FILED BY THE COMPANY WITH THE SEC, INCLUDING THE FINANCIAL STATEMENTS AND SCHEDULES THERETO, WILL BE PROVIDED FREE OF CHARGE UPON WRITTEN REQUEST DIRECTED TO: PEOPLES BANCORP OF NORTH CAROLINA, INC., POST OFFICE BOX 467, 518 WEST C STREET, NEWTON, NORTH CAROLINA 28658-0467, ATTENTION: JEFFREY HOOPER.

 

By Order of the Board of Directors,   Lance A. Sellers President and Chief Executive Officer

 

Newton, North Carolina

March 24, 2021

 

 

APPENDIX A

 

ANNUAL REPORT

OF

PEOPLES BANCORP OF NORTH CAROLINA, INC.

 

[See Attached]

 

 

	2020	2019	2018	2017	2016
Summary of Operations
Interest income	$47,958	49,601	45,350	41,949	39,809
Interest expense	3,836	3,757	2,146	2,377	3,271
Net interest income	44,122	45,844	43,204	39,572	36,538
Provision for (reduction of) loan losses	4,259	863	790	(507)	(1,206)
Net interest income after provision
for loan losses	39,863	44,981	42,414	40,079	37,744
Non-interest income (1)	22,914	17,739	16,166	15,364	16,236
Non-interest expense (1)	48,931	45,517	42,574	41,228	42,242
Earnings before income taxes	13,846	17,203	16,006	14,215	11,738
Income tax expense	2,489	3,136	2,624	3,947	2,561
Net earnings	$11,357	14,067	13,382	10,268	9,177
Selected Year-End Balances
Assets	$1,414,855	1,154,882	1,093,251	1,092,166	1,087,991
Investment securities available for sale	245,249	195,746	194,578	229,321	249,946
Net loans	938,731	843,194	797,578	753,398	716,261
Mortgage loans held for sale	9,139	4,417	680	857	5,709
Interest-earning assets	1,326,489	1,058,937	1,007,078	996,509	999,201
Deposits	1,221,086	966,517	877,213	906,952	892,918
Interest-bearing liabilities	805,771	668,353	657,110	679,922	698,120
Shareholders' equity	$139,899	134,120	123,617	115,975	107,428
Shares outstanding	5,787,504	5,912,300	5,995,256	5,995,256	5,417,800
Selected Average Balances
Assets	$1,365,642	1,143,338	1,094,707	1,098,992	1,076,604
Investment securities available for sale	200,821	185,302	209,742	234,278	252,725
Loans	935,970	834,517	777,098	741,655	703,484
Interest-earning assets	1,271,764	1,055,730	1,007,484	998,821	985,236
Deposits	1,115,019	932,647	903,120	895,129	856,313
Interest-bearing liabilities	793,188	675,992	665,165	700,559	705,291
Shareholders' equity	$141,287	134,670	123,797	116,883	113,196
Shares outstanding (2)	5,808,121	5,941,873	5,995,256	5,988,183	6,024,970
Profitability Ratios
Return on average total assets	0.83%	1.23%	1.22%	0.93%	0.85%
Return on average shareholders' equity	8.04%	10.45%	10.81%	8.78%	8.11%
Dividend payout ratio	38.67%	28.00%	23.41%	25.67%	22.95%
Liquidity and Capital Ratios (averages)
Loan to deposit	83.94%	89.48%	86.05%	82.85%	82.15%
Shareholders' equity to total assets	10.35%	11.78%	11.31%	10.64%	10.51%
Per share of Common Stock (2)
Basic net earnings	$1.95	2.37	2.23	1.71	1.53
Diluted net earnings	$1.95	2.36	2.22	1.69	1.50
Cash dividends	$0.75	0.66	0.52	0.44	0.35
Book value	$24.17	22.68	20.62	19.34	18.03