DEF 14A of Peoples Bancorp Of North Carolina Inc
Filed Mar 27, 2024 · FY20230001654954-24-003699
NOTICE OF 2024 ANNUAL MEETING OF SHAREHOLDERS
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 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, 2023, 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 Bylaws provide for a board of directors consisting of not less than five nor more than 15 directors, the exact number to be determined by resolution of a majority of the Board of Directors. Our Board has set the number of directors at 11. 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, 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. The Board has nominated the 11 persons named below for election as directors to serve for a one-year term until the 2025 Annual Meeting of Shareholders. All of the director nominees currently serve as directors of the Company and the Bank. Each of the nominees brings special skills and attributes to the Board through a variety of levels of education, business experience, director experience, banking experience, philanthropic interests, and community involvement. Additional information about each nominee and his or her special skills is provided below. The age of each nominee is given as of February 1, 2024. Director Nominees James S. Abernethy, age 69, is employed by Carolina Glove Company, Inc., a glove manufacturing company as its Vice President. Mr. Abernethy also serves as President and Assistant Secretary of Midstate Contractors, Inc., a paving company and 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 31 years of banking experience and is a graduate of the North Carolina (N.C.) Bank Directors’ College and attended the initial Advanced Directors’ Training session offered by the N.C. Bank Directors’ College in association with the College of Management at North Carolina State University. Over his 31 years of service on the Board, Mr. Abernethy has served on all the committees of the Bank Board and the Board. Mr. Abernethy earned a business administration degree from Gardner Webb University.
NOTICE OF 2024 ANNUAL MEETING OF SHAREHOLDERS
Robert C. Abernethy, age 73, is employed by Carolina Glove Company, Inc., a glove manufacturing company, as its President, Secretary and Treasurer. Mr. Abernethy also serves 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 47 years of banking experience and is a graduate of the N.C. Bank Directors’ College and attended the initial Advanced Directors’ Training session offered by the N.C. Bank Directors’ College in association with the College of Management at North Carolina State University. He serves on the Finance Committee and Investment Committee of Grace United Church of Christ, Newton, NC. Mr. Abernethy also serves on the board of directors of Carolina Glove Company, Inc. and Midstate Contractors, Inc. both privately held companies. Mr. Abernethy earned a B.S. degree from Gardner Webb University. Kimberly Boyd-Leaks, age 64, serves as Executive Vice President and Chief Banking Support Officer of the Company and the Bank. Currently, she is responsible for the Human Resources, Marketing, Learning & Development, Call Center, Retail Sales Support and Customer Relationship Management (CRM) teams. She has been employed by the Bank since 1994, serving as Chief Banking Support Officer since 2001. She has served as a director of the Company since September 2021. She serves on the N.C. Bankers Association Community Insurance Advisory Council and the Diversity, Equity, & Inclusion Council. Ms. Boyd-Leaks has been an active member of the Minority Businesswomen of Catawba County, and Hickory Metro Higher Education Advisory Council. She has previously served as a member of the board of directors of the Catawba County YMCA, Catawba County Department of Social Services, and the Volunteer Center – Catawba County United Way. Ms. Boyd-Leaks is a frequent spokesperson at community events, speaking on topics such as Retail Banking and Women’s Leadership. She has been recognized as a community leader by Catawba Valley Community College. She earned an associate degree in business from the University of Wisconsin, where she attended Retail Banking School. She has also completed the Human Resource Management program at Purdue University and has earned various other certifications in learning and development. Douglas S. Howard, age 65, is Vice President and Treasurer of Denver Equipment Company of Charlotte, Inc. Mr. Howard is an Owner and Member Manager of Denver Investors, LLC and an Owner and Secretary/Treasurer of Howard & Poole, Inc. He has served as a director of the Company since 2004. Mr. Howard has a total of 25 years of banking experience and is a graduate of the N.C. Bank Directors’ College and attended the initial Advanced Directors’ Training session offered by the N.C. 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 presently serves as a director of Catawba Valley Medical Center. John W. Lineberger, Jr., age 73, is Vice President of Lineberger Brothers, Inc., a real estate development company. He has served as a director of the Company since 2004. Mr. Lineberger has a total of 19 years of banking experience and is a graduate of the N.C. Bank Directors’ College and attended the initial Advanced Directors’ Training session offered by the N.C. 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 68, 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 over 21 years of banking experience, is a graduate of the N.C. Bank Directors’ College, and attended the initial Advanced Directors’ Training session offered by the N.C. 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 67, 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 19 years of banking experience and is a graduate of the N.C. Bank Directors’ College and attended the initial Advanced Directors’ Training session offered by the N.C. 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. He serves as Medical Director and Assistant Professor to Lenoir Rhyne University Physician Assistants Master of Science Program. 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.
NOTICE OF 2024 ANNUAL MEETING OF SHAREHOLDERS
Larry E. Robinson, age 78, 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 30 years of banking experience and is a graduate of the N.C. Bank Directors’ College, and attended the initial Advanced Directors’ Training session offered by the N.C. Bank Directors’ College in association with the College of Management at North Carolina State University. Mr. Robinson attended Western Carolina University and earned an Associate Degree in business and accounting from Catawba Valley Community College. William Gregory Terry, age 56, is President of Clemson Legacy Designs and Collegiate Legacy Designs and a consultant/director of Drum & Willis-Reynolds Funeral Homes and Crematory. Mr. Terry also served as President of DFH Holdings from 2007 through 2019. He has served as a director of the Company since 2004. Mr. Terry has a total of 19 years of banking experience and is a graduate of the N.C. Bank Directors’ College and attended the initial Advanced Directors’ Training session offered by the N.C. Bank Directors’ College in association with the College of Management at North Carolina State University. Mr. Terry has served on numerous civic and community boards. Mr. Terry graduated with a B.S. degree in business management from Clemson University. Dan Ray Timmerman, Sr., age 76, 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 28 years of banking experience and is a graduate of the N.C. Bank Directors’ College and attended the initial Advanced Directors’ Training session offered by the N.C. 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. Benjamin I. Zachary, age 67, is employed by Alexander Railroad Company as its President, Treasurer and General Manager. He has served as a director of the Company since 1995. Mr. Zachary has a total of 28 years of banking experience and is a graduate of the N.C. Bank Directors’ College. As a qualified Certified Public Accountant, he worked 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. He also serves as a director of Alexander Railroad Company. Mr. Zachary earned a B.S. degree in business administration with a concentration in accounting from the University of North Carolina at Chapel Hill. 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 the death or disqualification of any nominee or the refusal or inability of any nominee to serve as a director, the proxies may vote for the election of such other person as they may determine in their discretion or may allow a vacancy to remain open until filled by the Board of Directors. 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 above nominees. Each nominee will be elected by the affirmative vote of a majority of votes cast at the Annual Meeting, with a plurality vote standard for a contested director election, that is, when the number of director nominees exceeds the number of Board seats for which elections are being held. Except for Ms. Boyd-Leaks, all members of the Board are “independent” as defined by the rules and listing standards of The NASDAQ Global Select Market.
THE BOARD OF DIRECTORS RECOMMENDS YOU VOTE “FOR” ALL OF THE NOMINEES NAMED ABOVE AS DIRECTORS
THE BOARD OF DIRECTORS RECOMMENDS YOU VOTE “FOR” ALL OF THE NOMINEES NAMED ABOVE AS DIRECTORS Executive Officers of the Company During 2023, our executive officers were (ages as of February 1, 2024): Lance A. Sellers, age 61, serves as the President and Chief Executive Officer of the Company and the Bank. Previously, 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 39 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 55, 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, previously serving as Senior Vice President-Information Services. Mr. Cable has a total of 32 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. Jeffrey Hooper, age 54, 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 in 2020. Previously, 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 18 years of banking experience. Kimberly Boyd-Leaks, age 64, serves as Executive Vice President and Chief Banking Support Officer of the Company and the Bank. Currently, she is responsible for the Human Resources, Marketing, Learning & Development, Call Center, Retail Sales Support and Customer Relationship Management (CRM) teams. Ms. Boyd-Leaks has been employed by the Bank since 1994, serving as Chief Banking Support Officer since 2001. She is a graduate of the University of Wisconsin, where she attended Retail Banking School. She has also completed the Human Resource Management program at Purdue University and has earned various other certifications in learning and development. Timothy P. Turner, age 61, serves as Executive Vice President and Chief Credit Officer of the Bank. He is responsible for the Bank’s Commercial Credit and Credit Administration function. He has been employed by the Bank since 2010, previously serving as First Vice President-Commercial Credit Officer and Senior Vice President-Senior Credit Officer. Mr. Turner earned a Bachelor of Business Administration and a Master of Business Administration at Campbell University. He has spent 20 years in commercial lending, and four years in credit administration. Mr. Turner has a total of 36 years of banking experience. James O. Perry, age 53, serves as Executive Vice President and Chief Retail Officer of the Bank. He is responsible for the Bank’s Mortgage Sales and Retail Banking functions. He has been employed by the Bank since 1999, previously serving as Vice President-Commercial Loan Officer, First Vice President-Commercial Area Executive and Senior Vice President-Retail Banking Manager. Mr. Perry earned a BA in Economics at the University of Illinois Urbana, and also graduate from the Graduate School of Banking at Louisiana State University. He previously spent two years as a small business banker with a national bank, two years in credit administration and as a commercial loan officer, and four years with the Office of the Comptroller of the Currency. Mr. Perry has a total of 32 years of banking experience.
THE BOARD OF DIRECTORS RECOMMENDS YOU VOTE “FOR” ALL OF THE NOMINEES NAMED ABOVE AS DIRECTORS
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THE BOARD OF DIRECTORS RECOMMENDS YOU VOTE “FOR” ALL OF THE NOMINEES NAMED ABOVE AS DIRECTORS
How often did our Board of Directors meet during 2023? Our Board held 15 meetings during 2023. All incumbent directors attended more than 75% of the total number of meetings of the Board and its committees on which they served during the year. What is our policy for director attendance at Annual Meetings? Although it is customary for all of our directors to attend Annual Meetings of Shareholders, we have no formal policy in place requiring attendance. All members of the Board attended our 2023 Annual Meeting of Shareholders held on May 4, 2023. How can you communicate with the Board or its members? We do not have formal procedures for shareholder communication with our Board. In general, our directors and officers are easily accessible by telephone, postal mail or e-mail. Any matter intended for your Board, 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, 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 The ultimate authority to oversee the business of the Company rests with the Board. The Board is led by our Chairman, and in his absence, our Vice Chairman. Robert Abernethy currently serves as Chairman of the Board of Directors, and James Abernethy serves as the Vice Chairman of the Board. The role of the Board is to effectively govern the affairs of the Company for the benefit of its shareholders and, to the extent appropriate under North Carolina corporate law, other constituencies including employees, customers, suppliers and the communities in which it does business. The officers of the Company are elected from time to time by the Board or appointed from time to time by the President and Chief Executive Officer (to the extent that the President and Chief Executive Officer is authorized by the Board to appoint officers). Our President and Chief Executive Officer is responsible for leading our management team and employees, and operating the Company. Neither our Chairman nor our Vice Chairman are employed by the Company or the Bank. We believe that having a non-employee Chairman and separating the role of Chairman from that of President/Chief Executive Officer is one more method to create appropriate “checks and balances” in corporate governance as we seek to operate the Company in an effective and efficient manner for the benefit of our shareholders and other constituencies. The Governance Committee, as part of its annual review, evaluates our leadership structure and performance and reports its findings to the whole Board. We believe our current structure results in strong, independent leadership of our Board. Risk management is the responsibility of management and risk oversight is the responsibility of the Board. The Board administers its risk oversight function and also utilizes its committee structure, with each board committee being responsible for overseeing risk within its area of responsibility. Significant risk oversight matters considered by the committees are reported to and considered by the Board. Some significant risk oversight matters are reported directly to the Board, including matters not falling within the area of responsibility of any committee. Types of risk with the potential to adversely affect us include credit, interest rate, liquidity and compliance risks, as well as risks relating to our operations and reputation. Directors keep themselves informed of the activities and condition of the Company and of the risk environment in which it operates by regularly attending Board and assigned board committee meetings, and by review of meeting materials, auditors’ findings and recommendations, and supervisory communications. Directors stay current on general industry trends and any statutory and regulatory developments pertinent to us by periodic briefings by executive management, counsel, auditors or other consultants, and by more formal director education, including attendance at regulator sponsored “Director’s Colleges,” banking industry conventions, and other similar programs. Directors are provided access to all training and given specific in-person training on items such as Regulation O, Bank Secrecy Act, and other banking guidance and regulations.
THE BOARD OF DIRECTORS RECOMMENDS YOU VOTE “FOR” ALL OF THE NOMINEES NAMED ABOVE AS DIRECTORS
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THE BOARD OF DIRECTORS RECOMMENDS YOU VOTE “FOR” ALL OF THE NOMINEES NAMED ABOVE AS DIRECTORS
| The Board oversees the conduct of our business and administers the risk management function by: | | | • | selecting, evaluating, and retaining competent executive management; | | • | establishing, with executive management, our long- and short-term business objectives, and adopting operating policies to achieve these objectives in a legal and sound manner; | | • | monitoring operations to ensure that they are controlled adequately and are in compliance with laws and policies; | | • | overseeing our business performance; and | | • | ensuring that we help to meet our communities’ credit needs. | | These responsibilities are governed by a complex framework of federal and state law and regulation as well as regulatory guidelines applicable to our operations. | |
THE BOARD OF DIRECTORS RECOMMENDS YOU VOTE “FOR” ALL OF THE NOMINEES NAMED ABOVE AS DIRECTORS
The Board has established committees in order to effectively divide risk monitoring responsibilities and capabilities. The Company has four standing committees: the Executive Committee, Governance Committee, Audit and Enterprise Risk Committee, and Compensation Committee. The Chief Executive Officer also serves on the Executive Committee. The Audit and Enterprise Risk Committee, charged by the Board with the primary oversight responsibility for risk management, also oversees the integrity of financial reporting, compliance with laws and regulations, and the structure of internal control. The Compensation Committee provides oversight of executive compensation as well as other compensation programs for associates and bank officers. The Governance Committee assists in the establishment of principles for the Company and provides leadership on corporate governance matters. The Executive Committee studies and makes recommendations to the Board on matters related to setting the overall strategic direction for the preparation by the Company’s management of formal multi-year business plans. The Executive Committee may exercise, during intervals between meetings of the Board, all the powers and authority of the Board in directing the management of the business and affairs of the Company, except as otherwise provided in the Bylaws of the Company or by North Carolina law. In addition, the full Bank Board serves as the Bank’s loan committee, and the Bank Board has established a loan sub-committee which monitors credit risk. In the day-to-day management of risk, management has established and implemented appropriate policies, procedures and risk assessment tools, and a defined organization and reporting structure. With respect to the organization and reporting structure, a hierarchy has been created which divides responsibility along functional lines of authority and further divides responsibilities efficiently and effectively into specific processes. The structure is further enhanced by providing the internal audit and loan review functions independent functional reporting responsibilities to the Audit and Enterprise Risk Committee. Risk assessments have been created to properly identify and monitor risk for the Company either at an entity level or within specific types of business as appropriate. 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 is a guide to help ensure that directors, officers, and employees maintain the highest ethical standards of behavior. A copy of the Code is available on the Bank’s website (www.peoplesbanknc.com) under the “Investor Relations” tab.
THE BOARD OF DIRECTORS RECOMMENDS YOU VOTE “FOR” ALL OF THE NOMINEES NAMED ABOVE AS DIRECTORS
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THE BOARD OF DIRECTORS RECOMMENDS YOU VOTE “FOR” ALL OF THE NOMINEES NAMED ABOVE AS DIRECTORS
As is permitted by SEC rules, the Company intends to post on its website any amendment to or waiver from any provision in the Code that applies to the Chief Executive Officer, the Chief Financial Officer, the Controller, or persons performing similar functions, and that relates to any element of the standards enumerated in the rules of the SEC. Diversity of the Board of Directors The Bank Board has adopted a written diversity policy as an integral part of its employee handbook. The Company and the Bank value diversity in society, and believe that the virtues and pursuit of diversity are just as important within the Company and the Bank. The Company and the Bank adhere to a policy prohibiting discrimination and harassment on the basis of legally protected characteristics, including sex, pregnancy, race, color, religion, national origin, veteran status, age, and disability. 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, 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 may disregard any nominations that do not comply with these requirements. Upon the instruction of the Board, 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 Bank Board? The Bank currently has an 11 member board of directors which is comprised of the same persons who are currently directors of the Company. Those persons elected to the Board at the Annual Meeting will also be elected by the Company as directors of the Bank. Board Committees During 2023, our Board had four standing committees, the Audit and Enterprise Risk Committee, the Governance Committee, the Compensation Committee, and the Executive Committee. The voting members of these Committees are appointed by the Board annually from among its members. Certain of our executive officers also serve as non-voting, advisory members of these committees. Executive Committee. The Executive Committee performs duties as assigned by the full Board. The following persons currently serve on the Executive Committee: Directors R. Abernethy, J. Abernethy, Lineberger, Terry and Zachary, as well as the President and Chief Executive Officer of the Company, who serves in a non-voting capacity. It meets on an “as needed” basis and did not meet during 2023. Governance Committee. The Governance Committee is responsible for developing and maintaining the Company’s corporate governance policy, as well as acting as the nominating committee for the Board. The following persons currently serve on the Governance Committee: Directors R. Abernethy, J. Abernethy, Timmerman, Howard, and Matthews. The Board has determined that all of the members of the Governance Committee are independent as defined by the rules and listing standards of The NASDAQ Global Select Market. The Governance Committee, serving as the nominating committee of the Board, interviews candidates for nomination and election to the Board. The Governance Committee’s identification of candidates for director typically results from the business interactions of the members of the Governance Committee or from recommendations received from other directors or from the Company’s management.
THE BOARD OF DIRECTORS RECOMMENDS YOU VOTE “FOR” ALL OF THE NOMINEES NAMED ABOVE AS DIRECTORS
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THE BOARD OF DIRECTORS RECOMMENDS YOU VOTE “FOR” ALL OF THE NOMINEES NAMED ABOVE AS DIRECTORS
If a shareholder recommends a director candidate to the Governance Committee in accordance with the Company’s Bylaws, the Governance Committee will consider the candidate and apply the same considerations that it would to its own candidates. The recommendation of a candidate by a shareholder should be made in writing, addressed to the attention of the Governance Committee at the Company’s corporate headquarters. The recommendation should include a description of the candidate’s background, his or her contact information, and any other information the shareholder considers useful and appropriate for the Governance Committee’s consideration of the candidate. The criteria which have been established by the Governance Committee as bearing on the consideration of a candidate’s qualification to serve as a director include the following: the candidate’s ethics, integrity, involvement in the community, success in business, relationship with the Bank, investment in the Company, place of residence (i.e., proximity to the Bank’s market area), and financial expertise. The Governance Committee met two times during the year ended December 31, 2023. The Governance Committee has a written charter which is reviewed annually, and amended as needed, by the Governance Committee. A copy of the charter is available on the Bank’s website (www.peoplesbanknc.com) under the “Investor Relations” tab. 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 charter is available on the Bank’s website (www.peoplesbanknc.com) under the “Investor Relations” tab. The following persons currently serve on the Audit Committee: Directors R. Abernethy, Howard, Lineberger, Price, Terry, and Zachary. The Board has determined that each member of the Audit Committee is independent as that term is defined by the rules and listing standards of The NASDAQ Global Select Market and the SEC’s regulations. In addition, the Board 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 seven times during the year ended December 31, 2023. Audit Committee Report. The Audit Committee has reviewed and discussed the audited financial statements with management of the Company and has discussed with the independent auditors the matters required to be discussed by Auditing Standards No. 16 as amended (AICPA, Professional Standards, Vol. 1 AU section 380) as adopted by the Public Company Accounting Oversight Board in Rule 3200T. In addition, the Audit Committee has received the written disclosures and the letter from the independent accountants required by the applicable requirements of the Public Company Accounting Oversight Board regarding the independent accountant’s communications with the Audit Committee concerning independence, and has discussed with the independent accountant the independent accountant’s independence. Based upon these reviews and discussions, the Audit Committee recommended to the Board of Directors that the audited financial statements be included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023 for filing with the SEC.
THE BOARD OF DIRECTORS RECOMMENDS YOU VOTE “FOR” ALL OF THE NOMINEES NAMED ABOVE AS DIRECTORS
| Robert C. Abernethy | John W. Lineberger, Jr. | | Benjamin I. Zachary Douglas S. Howard | W. Greg Terry Billy L Price, Jr. MD, Committee Chair |
THE BOARD OF DIRECTORS RECOMMENDS YOU VOTE “FOR” ALL OF THE NOMINEES NAMED ABOVE AS DIRECTORS
Compensation Committee. The Company’s Compensation Committee is responsible for developing, reviewing, implementing and maintaining the Bank’s salary, bonus, and incentive compensation programs and for making recommendations to the Board of Directors and the Bank Board regarding compensation of the executive officers. Upon recommendation from the Compensation Committee, the Board ultimately determines such compensation.
THE BOARD OF DIRECTORS RECOMMENDS YOU VOTE “FOR” ALL OF THE NOMINEES NAMED ABOVE AS DIRECTORS
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THE BOARD OF DIRECTORS RECOMMENDS YOU VOTE “FOR” ALL OF THE NOMINEES NAMED ABOVE AS DIRECTORS
The Board of Directors has determined that all of the members of the Compensation Committee are independent as defined by the rules and listing standards of The NASDAQ Global Select Market. The following persons currently serve on the Compensation Committee: Directors R. Abernethy, J. Abernethy, Howard, Timmerman, and Matthews. The Compensation Committee met three times during the year ended December 31, 2023. The Compensation Committee has a written charter which is reviewed annually, and amended as needed, by the Compensation Committee. A copy of the charter is available on the Bank’s website (www.peoplesbanknc.com) under the “Investor Relations” tab. 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 Board of Directors. See Indebtedness of and Transactions with Management and Directors starting on page 30 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, 2023.
THE BOARD OF DIRECTORS RECOMMENDS YOU VOTE “FOR” ALL OF THE NOMINEES NAMED ABOVE AS DIRECTORS
| Compensation Committee Robert C. Abernethy James S. Abernethy Douglas S. Howard Gary E. Matthews Dan R. Timmerman, Sr., Committee Chair |
THE BOARD OF DIRECTORS RECOMMENDS YOU VOTE “FOR” ALL OF THE NOMINEES NAMED ABOVE AS DIRECTORS
COMPENSATION DISCUSSION AND ANALYSIS In this section, we will give an overview of our compensation program, the material compensation decisions we have made under the program and the material factors that we considered in making those decisions. Following this discussion, in the section entitled “– Summary Compensation Table,” we provide a table containing specific information about the compensation earned for the fiscal years indicated, by the following officers, whom we refer to as our “named executive officers:”
THE BOARD OF DIRECTORS RECOMMENDS YOU VOTE “FOR” ALL OF THE NOMINEES NAMED ABOVE AS DIRECTORS
| • | Lance A. Sellers, President and Chief Executive Officer; | | • | Jeffrey N. Hooper, Executive Vice President and Chief Financial Officer; and | | • | William D. Cable, Sr., Executive Vice President and Chief Operating Officer. |
THE BOARD OF DIRECTORS RECOMMENDS YOU VOTE “FOR” ALL OF THE NOMINEES NAMED ABOVE AS DIRECTORS
Compensation Committee Processes and Procedures The Compensation Committee assists the Board in determining appropriate compensation levels for the members of the Board and our named executive officers. It also has strategic and administrative responsibility for a broad range of compensation issues. It seeks to ensure that we compensate key management employees effectively and in a manner consistent with the Compensation Committee’s stated compensation strategy and relevant requirements of various regulatory entities. A part of these responsibilities is overseeing the administration of executive compensation and employee benefit plans, including the design, selection of participants, establishment of performance measures, and evaluation of awards pursuant to our annual and long-term incentive programs.
THE BOARD OF DIRECTORS RECOMMENDS YOU VOTE “FOR” ALL OF THE NOMINEES NAMED ABOVE AS DIRECTORS
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THE BOARD OF DIRECTORS RECOMMENDS YOU VOTE “FOR” ALL OF THE NOMINEES NAMED ABOVE AS DIRECTORS
Compensation Philosophy The overall objective of our executive compensation program is to promote the interests of the Company by compensating our executives in a manner that closely aligns their interests with those of the Company’s shareholders. In order to accomplish this overall objective, our executive compensation program is designed to (i) attract qualified executives necessary to meet those needs identified in the Company’s strategic plans, and (ii) retain and motivate executives whose performance supports the achievement of our long-term plans and short-term goals. Our executive compensation program is founded upon the guiding principle that a strong, performance-oriented compensation program, generally consistent with that of our peers, is critical to our ability to succeed in becoming a leading performer among financial institutions of similar size, and thereby reward our shareholders for their investment in the Company. The Compensation Committee considers a number of factors specific to each executive’s role when determining the amount and mix of compensation to be paid. These factors are:
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| • | compensation of comparable executives at peer financial institutions; | | • | financial performance of the Company (especially on a “net operating” basis, which excludes the effect of one-time gains and expenses) over the most recent fiscal year and the prior three years; | | • | composition of earnings; | | • | asset quality relative to the banking industry; | | • | responsiveness to the economic environment; | | • | the Company’s achievements compared to its corporate, financial, strategic and operational objectives and business plans; and | | • | cumulative shareholder return. |
THE BOARD OF DIRECTORS RECOMMENDS YOU VOTE “FOR” ALL OF THE NOMINEES NAMED ABOVE AS DIRECTORS
Elements of the Executive Compensation Program The Company’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 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 Board. Each individual’s incentive pool is determined by a formula that 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, 2023. Discretionary Bonus and Service Awards. From time to time the Compensation Committee may recommend to the Board that additional bonuses be paid based on accomplishments that significantly exceed expectations during the fiscal year. These bonuses are totally discretionary as to who will receive a bonus and the amount of any such bonus. In 2023, the Compensation Committee recommended, and the Board approved, discretionary bonuses as follows: $150,000 for Mr. Sellers; $70,000 for Mr. Hooper; and $70,000 for Mr. Cable. These discretionary bonuses were paid in January 2024. Under the Service Recognition Program, the Bank gives service awards to each employee and director for every five years of service with the Bank to promote and reward longevity of service for both directors and employees. Service awards are made in the form of shares of the Company’s common stock plus cash in the amount necessary to pay taxes on the award. The number of shares awarded increases with the number of years of service to the Bank. 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.
THE BOARD OF DIRECTORS RECOMMENDS YOU VOTE “FOR” ALL OF THE NOMINEES NAMED ABOVE AS DIRECTORS
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THE BOARD OF DIRECTORS RECOMMENDS YOU VOTE “FOR” ALL OF THE NOMINEES NAMED ABOVE AS DIRECTORS
Long-Term Equity Incentive Awards. Pursuant to the 2020 Omnibus Stock Ownership and Long-Term Incentive Plan (“2020 Omnibus Plan”), the Company may grant incentive stock options, restricted stock, restricted stock units, stock appreciation rights, book value shares, and performance units to qualifying directors and employees. 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 executives of the Company greater incentive to make material contributions to the success of the Company by providing them with stock-based compensation which would increase in value based upon the market performance of our common stock. The 2020 Omnibus Plan was approved by our shareholders on May 7, 2020 and expires on May 7, 2030. “Outstanding Equity Awards at Fiscal Year-End Table” on page 21 of this Proxy Statement and “Option Exercises and Stock Vested” on page 21 of this Proxy Statement for information on equity incentive awards made to the named executed officers under the 2020 Omnibus Plan and the Company’s 2009 Omnibus Stock Ownership and Long Term Incentive Plan (“2009 Omnibus Plan” and together with the 2020 Omnibus Plan, the “Omnibus Plans”) which expired on May 7, 2019. See “Omnibus Plans” starting on page 23 of this Proxy Statement for additional information on the Omnibus Plans. Supplemental Executive Retirement Agreements. The Bank has entered into Amended and Restated Executive Salary Continuation Agreements with Messrs. Sellers and Cable, and an Executive Salary Continuation Agreement with Mr. Hooper, which provide each executive a non-qualified supplemental executive retirement benefit. The Committee’s goal is to provide competitive retirement benefits given the restrictions on executives within tax-qualified plans. In prior years, the Committee worked with a compensation consultant to analyze and consider the possible benefits of providing supplemental retirement benefits and to consider what is provided to executives in our peer group. In connection with the non-qualified supplemental executive retirement benefits, the Company and/or the Bank purchased life insurance policies on the lives of the named executive officers. The increase in cash surrender value of a life insurance policy constitutes the Bank’s contribution to the plan each year. Under the terms of the agreements, the Bank will pay benefits to participating executives for a period between 13 years and the life of the executive. 401(k) Plan. The Bank has established a 401(k) Plan for eligible employees. Under the Bank’s 401(k) Plan, the Bank matches employee contributions up to a maximum of 4.00% of annual compensation. The Bank’s 2023 contribution to the 401(k) Plan was approximately $759,000. All contributions to the 401(k) Plan are tax deferred. The 401(k) Plan permits participants to choose from investment funds selected by a committee comprised of senior management. Employees are eligible to participate in the 401(k) Plan beginning in the second month of employment. All participants are immediately 100% vested in employer contributions made under the plan. Deferred Compensation Plan. The Bank maintains a non-qualified deferred compensation plan for directors and certain officers. Eligible officers selected by the Bank Board may elect to contribute a percentage of their compensation to the plan. Participating officers may elect to invest their deferred compensation in a restricted list of investment funds. The Bank may make matching or other contributions to the plan as well, in amounts determined at the discretion of the Bank. Participants are fully vested in all amounts contributed to the plan by them or on their behalf. The Bank has established a Rabbi Trust to hold the accrued benefits of the participants under the plan. There are no “above-market” returns provided for in this plan. The Bank made no contributions to the plan in 2023. Benefits under the plan are payable in the event of the participant’s retirement, death, termination, or as a result of hardship. Benefit payments may be made in a lump sum or in installments, as selected by the participant. Employment Agreements. The Company has entered into an employment agreement with each named executive officer. The employment agreements serve a number of functions, including: (i) retention of the executive team; (ii) mitigation of any uncertainty about future employment and continuity of management in the event of a change in control; and (iii) protection of the Bank and its customers through non-compete and non-solicitation covenants. Additional information regarding the employment agreements, including a description of key terms may be found under the heading “Employment Agreements” starting on page 22 of this Proxy Statement. Other Benefits. Executive officers are entitled to participate in fringe benefit plans offered to employees including health and dental insurance plans and life, accidental death and dismemberment and long-term disability plans. In addition, the Bank has paid country club dues for each named executive officer and provides a car allowance to Mr. Sellers.
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THE BOARD OF DIRECTORS RECOMMENDS YOU VOTE “FOR” ALL OF THE NOMINEES NAMED ABOVE AS DIRECTORS
The above elements of each named executive officer’s compensation are not inter-related. For example, if vesting standards on restricted stock awards are not achieved, the executive’s base salary is not increased to make up the difference. Similarly, the value of previously granted equity incentive awards is not considered by the Compensation Committee in recommending the other elements of the compensation package. The Compensation Committee did not engage a compensation consultant during the year ended December 31, 2023. The President and Chief Executive Officer of the Company and the Bank makes recommendations to the Committee regarding the compensation of the other executive officers. The President and Chief Executive Officer participates in the deliberations, but not in the decisions, of the Committee. However, he does not participate in the Committee’s deliberations or decisions regarding his own compensation. The 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, a plurality of our shareholders voted to approve the compensation of our named executive officers (“Say-on-Pay”) once every three years. Accordingly, shareholders were, most recently, invited to vote on the “Say-on-Pay” proposal at the 2022 Annual Meeting. At the 2022 Annual Meeting, 89% of the shareholders who voted approved the executive compensation of our named executive officers. Clawback Policy and Amendments to Employment Agreements In October 2023, the Compensation Committee adopted, and the Board ratified, the Excess Incentive-Based Compensation Recovery Policy (the “Clawback Policy”) in compliance with the final clawback rules adopted by the SEC and the listing standards, as set forth in The Nasdaq Stock Market, LLC Listing Rule 5608 (the “Final Clawback Rules”). The Clawback Policy provides for the mandatory recovery of erroneously awarded incentive-based compensation from current and former executive officers as defined in SEC Rule 10D-1 (“Covered Officers”) of the Company in the event that the Company is required to prepare an accounting restatement to correct a material error, in accordance with the Final Clawback Rules. The recovery of such compensation applies regardless of whether a Covered Officer engaged in misconduct or otherwise caused or contributed to the requirement of an accounting restatement. Under the Clawback Policy, the Company may recoup from the Covered Officers erroneously awarded compensation received within a lookback period of the three completed fiscal years preceding the date on which the Company is required to prepare an accounting restatement to correct a material error. In November 2023, the Company entered into a First Amendment to Employment Agreement with each of its named executive officers: Lance A. Sellers, President and Chief Executive Officer; Jeffrey N. Hooper, Executive Vice President and Chief Financial Officer; and William D. Cable, Sr., Executive Vice President and Chief Operating Officer for the purposes of implementing compliance by each of the executives with the Clawback Policy. 2023 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 2023 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 20 of this Proxy Statement.
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The calculation below includes all employees as of October 31, 2023. The 2023 compensation disclosure ratio of the median annual total compensation of all Company employees to the annual total compensation of our Chief Executive Officer is as follows:
THE BOARD OF DIRECTORS RECOMMENDS YOU VOTE “FOR” ALL OF THE NOMINEES NAMED ABOVE AS DIRECTORS
| Median Annual Total Compensation of All Employees (excluding Lance A. Sellers, Chief Executive Officer) | $46,948 | | Annual Total Compensation of Lance A. Sellers, Chief Executive Officer | $649,367 | | Ratio of the Median Annual Total Compensation of All Employees to the Annual Total Compensation of Lance A. Sellers, Chief Executive Officer | 1:13.83 |
THE BOARD OF DIRECTORS RECOMMENDS YOU VOTE “FOR” ALL OF THE NOMINEES NAMED ABOVE AS DIRECTORS
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THE BOARD OF DIRECTORS RECOMMENDS YOU VOTE “FOR” ALL OF THE NOMINEES NAMED ABOVE AS DIRECTORS
EXECUTIVE COMPENSATION The named executive officers of the Company are not paid any cash compensation by the Company. However, they are also executive officers of the Bank and receive compensation from the Bank. The below tables show, for the fiscal years indicated, the cash compensation received by, as well as certain other compensation paid or accrued to, each named executive officer. Summary Compensation Table
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| Name and Principal Position | Year | Salary($) | Bonus($) | Stock Awards($)(1) | Change in Pension Value and Nonqualified Deferred Compensation Earnings($) | All Other Compensation($)(2) | Total($) | | Lance A. Sellers | 2023 | 357,397 | 150,000 | -- | 102,899 | 39,071 | 649,367 | | President and Chief Executive | 2022 | 357,397 | 150,000 | -- | 94,892 | 33,341 | 635,630 | | Jeffrey Hooper | 2023 | 201,173 | 70,000 | -- | 19,747 | 16,266 | 307,186 | | Executive Vice President and | 2022 | 195,314 | 70,000 | 40,000 | 17,855 | 15,832 | 339,000 | | Chief Financial Officer | | | | | | | | | William D. Cable, Sr. | 2023 | 248,122 | 70,000 | 40,000 | 40,799 | 35,448 | 434,369 | | Executive Vice President and Chief Operating Officer | 2022 | 240,895 | 70,000 | -- | 37,587 | 32,978 | 381,460 |
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| (1) Amount represents the aggregate grant date fair value computed in accordance with FASB ASC Topic 718. See Note 1 in the Notes to the Company’s Consolidated Financial Statements included in the Company’s Annual Report, which Annual Report is attached hereto as Appendix A. | | (2) All other compensation is comprised of the following: |
THE BOARD OF DIRECTORS RECOMMENDS YOU VOTE “FOR” ALL OF THE NOMINEES NAMED ABOVE AS DIRECTORS
| Name and Principal Position | Year | Employer Match – 401(k) ($) | 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($)(c) | | Lance A. Sellers | 2023 | 13,200 | 7,229 | 4,500 | 678 | 3,564 | 6,150 | -- | 3,750 | | President and Chief Executive Officer | 2022 | 12,200 | 6,461 | 4,320 | 647 | 3,564 | 6,150 | -- | -- | | Jeffrey Hooper | 2023 | 8,132 | -- | 3,768 | 488 | 974 | -- | 2,903 | -- | | Executive Vice President and Chief Financial Officer | 2022 | 7,658 | -- | 3,988 | 474 | 936 | -- | 2,775 | -- | | William D. Cable, Sr. | 2023 | 13,200 | -- | 4,320 | 601 | 1,186 | 12,027 | 2,776 | -- | | Executive Vice President and Chief Operating Officer | 2022 | 12,034 | -- | 4,320 | 601 | 1,186 | 12,027 | 2,810 | -- |
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THE BOARD OF DIRECTORS RECOMMENDS YOU VOTE “FOR” ALL OF THE NOMINEES NAMED ABOVE AS DIRECTORS
| (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 2023, Mr. Sellers received 110 shares for 25 years of service with the Bank and $750 in cash to pay taxes associated with the award under the Bank's Service Recognition Program. |
THE BOARD OF DIRECTORS RECOMMENDS YOU VOTE “FOR” ALL OF THE NOMINEES NAMED ABOVE AS DIRECTORS
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THE BOARD OF DIRECTORS RECOMMENDS YOU VOTE “FOR” ALL OF THE NOMINEES NAMED ABOVE AS DIRECTORS
Outstanding Equity Awards at Fiscal Year End The following table shows certain information for the named executive officer’s outstanding equity awards as of December 31, 2023. Outstanding Equity Awards at Fiscal Year-End Table
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| | Stock Awards | | | | | Name | Number of Shares or Units of Stock That Have Not Vested(#) | Market Value of Shares or Units of Stock That Have Not Vested ($) | 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)($) | | Lance A. Sellers | -- | -- | -- | -- | | Jeffrey N. Hooper | -- | -- | 3,190(2) | 98,699 | | William D. Cable, Sr. | -- | -- | 3,050(1) | 94,367 |
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| (1) Represents 1,820 restricted stock units that were granted on February 3, 2021 (with a grant date fair value for each unit of $22.04 and will vest on February 3, 2025 and 1,230 restricted stock units that were granted on January 19, 2023 (with a grant date fair value for each unit of $32.58) and will vest on January 19, 2027. | | (2) Represents 1,760 restricted stock units that were granted on May 7, 2020 (with a grant date fair value for each unit of $17.08) and will vest on May 7, 2024, and 1,430 restricted stock units that were granted on January 20, 2022 (with a grant date fair value for each unit of $27.99) and will vest on January 20, 2026 | | (3) Based on a stock price of $30.94 per share on December 31, 2023. |
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Option Exercises and Stock Vested During the fiscal year ended December 31, 2023, no options were exercised by the named executive officers and no previously granted restricted stock units vested. Pension Benefits The following table shows, for the fiscal year ended December 31, 2023, the pension benefits paid or earned by our named executive officers.
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| Name | Plan Name | Number of Years Credited Service | Present Value of Accumulated Benefit($) | Payments During Last Fiscal Year($) | | Lance A. Sellers | Amended and Restated Executive Salary Continuation Agreement(1) | 21 | 941,005 | -- | | Jeffrey N. Hooper | Executive Salary Continuation Agreement(2) | 3 | 61,147 | -- | | William D. Cable, Sr. | Amended and Restated Executive Salary Continuation Agreement(1) | 21 | 362,623 | -- |
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THE BOARD OF DIRECTORS RECOMMENDS YOU VOTE “FOR” ALL OF THE NOMINEES NAMED ABOVE AS DIRECTORS
| (1) The Bank entered into Amended and Restated Executive Salary Continuation Agreement with Messrs. Sellers and Cable effective on December 18, 2008. The Amended and Restated Executive Salary Continuation Agreements for Messrs. Sellers 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 and Mr. Cable will receive an annual supplemental retirement benefit of $93,872. | | (2) 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. |
THE BOARD OF DIRECTORS RECOMMENDS YOU VOTE “FOR” ALL OF THE NOMINEES NAMED ABOVE AS DIRECTORS
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THE BOARD OF DIRECTORS RECOMMENDS YOU VOTE “FOR” ALL OF THE NOMINEES NAMED ABOVE AS DIRECTORS
Employment Agreements In 2015, the Company and the Bank entered into an employment agreement with Mr. Sellers and Mr. Cable, and in August 2021, the Company and the Bank entered into an employment agreement with Mr. Hooper (collectively, the “Employment Agreements”). The Employment Agreements each provide for an initial term of 36 months. Annually, on the anniversary of the effective date of each Employment Agreement, the Employment Agreement is automatically extended for one additional year unless the Board of Directors or the executive gives the other party prior written notice that the term is not to be extended. Under the Employment Agreements, the Bank has agreed to pay Mr. Sellers a base salary of at least $311,400 per year, Mr. Cable a base salary of at least $198,750 per year, and Mr. Hooper a base salary of at least $189,625 per year. The Bank reviews each executive’s total compensation at least annually and in its sole discretion may adjust an executive’s total compensation from year to year; provided, however, that an executive’s base salary may not be reduced. 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, 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). 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 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. 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 described below. 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. In November of 2023 each of the Employment Agreements were amended to comply with the Clawback Policy. See page 18 of this Proxy Statement for more details concerning the Clawback Policy.
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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 officer “without cause,” or the officer terminates his or her employment for “good reason,” in any such case 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, will 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, 2023, “without cause” or for “good reason” at the time of or within one year after a “change of control”, Mr. Sellers, Mr. Cable, and Mr. Hooper would have been entitled to receive compensation of approximately $1,522,192, $954,366, and $813,520, respectively, pursuant to their Employment Agreements. These amounts are calculated based on each officer’s 2023 “Salary” and “Bonus” as shown in the “Summary Compensation Table” on page 20 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, 2023, all unvested restricted stock units previously granted to each of Mr. Cable and Mr. Hooper would have vested immediately. On December 31, 2023, these unvested restricted stock units had a fair market value of $94,367 for Mr. Cable and $98,699 for Mr. Hooper. Mr. Sellers had no outstanding restricted stock units at December 31, 2023. Omnibus Plans General. The purpose of the Omnibus Plans 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. The Omnibus Plans are administered by the Governance Committee. Subject to the terms of the Omnibus Plans, the Committee and the Board have authority to construe and interpret, for eligible employees and eligible directors, respectively, the Omnibus Plans, to determine the terms and provisions of Rights (as defined below) to be granted under the Omnibus Plans, to define the terms used in the Omnibus Plans and in the Rights granted thereunder, to prescribe, amend and rescind rules and regulations relating to the Omnibus Plans, 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 Omnibus Plans. Rights Which May Be Granted. Under the Omnibus Plans, 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. The 2009 Omnibus Plan also permitted the Committee to award book value shares. These grants and awards are referred to herein as the “Rights.” The 2009 Omnibus Plan expired on May 7, 2019, ten years after it was approved by our shareholders. Accordingly, no new awards or grants may be made under the 2009 Omnibus Plan. The 2020 Omnibus Plan was approved by our shareholders on May 7, 2020. Accordingly, no new awards or grants may be made under the 2020 Omnibus Plan after May 7, 2030, the tenth anniversary of the date our shareholders approved the 2020 Omnibus Plan. The Board initially reserved 360,000 shares of common stock for issuance under the 2009 Omnibus Plan, and another 300,000 shares of common stock for issuance under the 2020 Omnibus Plan. 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.
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THE BOARD OF DIRECTORS RECOMMENDS YOU VOTE “FOR” ALL OF THE NOMINEES NAMED ABOVE AS DIRECTORS
Change in Control. In the event of a change in control (as such term is defined in the applicable Omnibus Plan), all Rights under the applicable Omnibus Plan will fully vest and be released from any restrictions on transfer. In addition, with respect to the 2020 Omnibus Plan, 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 2020 Omnibus 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. During 2021, 2022, and 2023, the Board granted 7,060, 5,385, and 5,370 awards, respectively, of non-transferable restricted stock units to employees pursuant to the 2020 Omnibus 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. See “Equity Compensation Plan Information” on page 30 for information regarding outstanding options and shares for future issuance under the Omnibus Plans as of December 31, 2023. Pay Versus Performance
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| Pay Versus Performance Table | | | | | | | | Year | Summary Compensation Table Total for PEO 1 | Compensation Actually Paid to PEO 2 | Average Summary Compensation Table Total for Non-PEO NEOs 3 | Average Compensation Actually Paid to Non-PEO NEOs 4 | Value of Initial Fixed $100 Investment Based On Total Shareholder Return 5 | Net Income (Millions) 6 | | (a) | (b) | (c) | (d) | (e) | (f) | (g) | | 2023 | $649,367 | $546,468 | $370,778 | $354,503 | $147.27 | $15.5 | | 2022 | $635,630 | $540,738 | $360,230 | $371,470 | $149.30 | $16.1 | | 2021 | $580,524 | $493,085 | $339,350 | $360,501 | $99.42 | $15.1 |
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| 1 | The amounts reported in column (b) are the amounts of total compensation reported for our CEO (Chief Executive Officer) Lance A. Sellers (our PEO) for each corresponding year in the “Total” column of the Summary Compensation Table. | | 2 | The amounts reported in column (c) represent the amount of “Compensation Actually Paid” to Mr. Sellers, as computed in accordance with Item 402(v) of Regulation S-K. The amounts reported do not reflect the actual amount of compensation earned by or paid to Mr. Sellers during the applicable year. In accordance with the requirements of Item 402(v), the following adjustments were made to Mr. Sellers' total compensation as presented in the “Summary Compensation Table” for each year to determine the “Compensation Actually Paid”. No equity awards have been granted to Mr. Sellers, and, as a result the table below table does not include any equity award adjustments. |
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| Year | Reported Summary Compensation Table Total for PEO | SERP Service Cost (a) | Compensation Actually Paid to PEO | | 2023 | $649,367 | $(102,899) | $546,468 | | 2022 | $635,630 | $(94,892) | $540,738 | | 2021 | $580,524 | $(87,439) | $493,085 |
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| (a) | The amounts included in this column are the amounts reported in the “Change in Pension Value and Nonqualified Deferred Compensation Earnings” column of the “Summary Compensation Table” for each applicable year. | | 3 | The amounts reported in column (d) represent the average of the amounts reported for our NEOs as a group (excluding Mr. Sellers) in the “Total” column of the “Summary Compensation Table” in each applicable year. The names of the NEOs (excluding Mr. Sellers) included for purposes of calculating the average amounts in each applicable year are Jeffrey N. Hooper (our Chief Financial Officer, “CFO”) and William B. Cable (our Chief Operating Officer, “COO”). | | 4 | The amounts reported in column (e) represent the average amount of “Compensation Actually Paid” to the NEOs as a group (excluding Mr. Sellers), as computed in accordance with Item 402(v) of Regulation S-K. The names of the NEOs (excluding Mr. Sellers) included for purposes of calculating the average amounts in each applicable year are Jeffrey N. Hooper and William B. Cable. The amounts reported do not reflect the actual average amount of compensation earned by or paid to the NEOs as a group (excluding Mr. Sellers) during the applicable year. In accordance with the requirements of Item 402(v), the following adjustments were made to average total compensation for the NEOs as a group (excluding Mr. Sellers) for each year to determine the “Compensation Actually Paid”, using the same methodology described above in footnote (2): |
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| Year | Average Reported Summary Compensation Table Total For Non-PEO NEOs | Average Reported Grant Date Fair Value of Equity Awards (a(1)) | Average Equity Award Adjustments (b(1)) | Average SERP Service Cost | Average Compensation Actually Paid to Non-PEO NEOs | | 2023 | $370,778 | $(20,000) | $33,998 | $(30,273) | $354,503 | | 2022 | $360,230 | $(20,000) | $58,961 | $(27,721) | $371,470 | | 2021 | $339,350 | $(20,000) | $66,503 | $(25,352) | $360,501 |
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| (a(1)) | The amounts included in this column reflect the average for our NEOs as a group (excluding Mr. Sellers) of the fair value, computed in accordance with FASB ASC Topic 718, of equity awards granted in each applicable year. | | (b(1)) | The amounts deducted or added in calculating the total average equity award adjustments are as follows: |
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| Year | Average Year-End Fair Value of Outstanding and Unvested Equity Awards Granted in Applicable Year | Average Year over Year Change in Fair Value of Outstanding and Unvested Equity Awards Granted in Prior Years | Total Average Equity Award Adjustments | | 2023 | $38,056 | $(4,058) | $33,998 | | 2022 | $46,561 | $12,400 | $58,961 | | 2021 | $59,259 | $7,243 | $66,503 |
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| 5 | “Total Shareholder Return” (“TSR”) represents our cumulative total stockholder return during each measurement period and is calculated by dividing the sum of (i) the difference between the share price of our common stock at the end and the beginning of the measurement period, plus (ii) the cumulative amount of dividends paid on our common stock for the measurement period, assuming dividend reinvestment, by the share price of our common stock at the beginning of the measurement period. Each amount assumes that $100 was invested in our common stock on December 31, 2020, and dividends were reinvested for additional shares. | | 6 | The amounts reported represent the amount of net income (in millions) reflected in our audited consolidated financial statements for the applicable year. |
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Financial Performance Measures As described in greater detail in the section captioned “COMPENSATION DISCUSSION AND ANALYSIS - Elements of the Executive Compensation Program,” our executive compensation program includes variable components in the form of annual cash incentive awards, discretionary bonuses, and service awards and long-term incentive awards. The metrics that we use for their awards are selected based on an objective of incentivizing our NEOs to increase shareholder value. Changes in shareholder value are reflected in “Compensation Actually Paid” above through the fair value of our equity awards. Analysis of the Information Presented in the Pay Versus Performance Table As described in more detail in the section captioned “COMPENSATION DISCUSSION AND ANALYSIS - Elements of the Executive Compensation Program,” Our executive compensation program includes variable components in the form of annual incentive compensation, discretionary bonuses, and long-term incentive awards. While we utilize several performance measures to align executive compensation with our performance, all of those measures are not presented in the “Pay Versus Performance Table.” Moreover, we generally seek to incentivize long-term performance and, therefore, our performance measures, or indeed Company TSR, may not align with “Compensation Actually Paid” (as computed in accordance with Item 402(v) Regulation S-K) for a particular year. Compensation Actually Paid and Company TSR As demonstrated by the following graph, the amount of “Compensation Actually Paid” to Mr. Sellers and the average amount of “Compensation Actually Paid” to our NEOs as a group (excluding Mr. Sellers) is generally aligned with TSR. The general alignment of “Compensation Actually Paid” with our TSR is due to the fact that a portion of the “Compensation Actually Paid” to Mr. Sellers and to the other NEOs is comprised of equity awards and cash bonuses awarded based on the Company’s overall performance, including net income.
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Compensation Actually Paid and Net Income As demonstrated by the following table, the amount of “Compensation Actually Paid” to Mr. Sellers and the average amount of “Compensation Actually Paid” to our NEOs as a group (excluding Mr. Sellers) is generally aligned with our net income, with net income for each of 2023 and 2022 exceeding that of 2021. In 2023, the strategic sale of a portion of the Bank’s security portfolio generated a net loss of approximately $2.5 million; this was effected in order to reduce risk and provide the Bank with more flexibility to support loan growth and reduce the need for other borrowings, i.e. to support the Bank’s long-term financial performance.
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Director Compensation Directors’ Fees. Members of the Board of Directors receive no fees or compensation for their service. However, all members of the Board are also directors of the Bank and are compensated by the Bank for service on the Bank Board and its committees. During the year ended December 31, 2023, each director received a fee of $1,400 for each Bank Board meeting attended, an additional fee of $1,000 for each committee meeting attended and a retainer of $20,000. In addition, the Chairman of the Bank Board received an additional $250 per meeting attended and the chairpersons of each committee received an additional $150 per meeting attended. Directors receive a reduced fee of $500 for meetings held via conference call. Directors who serve as members of the boards of directors of Real Estate Advisory Services, Inc., Peoples Investment Services, Inc., and PB Real Estate Holdings, LLC, and Community Bank Real Estate Solutions, LLC, each subsidiaries of the Bank, receive $1,000 per meeting. 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 with 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.
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Directors’ Stock Benefits Plan. Members of the Board of Directors were eligible to participate in the Omnibus Plans. The Company did not grant any plan-based awards to directors during the fiscal year ended December 31, 2023. 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 or her 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 2023. 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 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 plan, the Company and/or the Bank purchased life insurance policies on the lives of each director. The increase in cash surrender value of the policies constitutes the Bank’s contribution to the plan each year. The Bank will pay annual benefits to each director for 15 years beginning upon retirement from the Board of Directors. The following table reports all forms of compensation paid to or accrued for the benefit of each director during the 2023 fiscal year. Director Compensation
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| Name | Fees Earned or Paid in Cash ($) | Stock Awards(1) ($) | Option Awards ($) | Non-Equity Incentive Plan Compensation ($) | Change in Pension Value and Nonqualified Deferred Compensation Earnings2 ($) | All Other Compensation ($)3 | Total ($) | | James S. Abernethy | 43,250 | -- | -- | -- | 12,100 | -- | 55,350 | | Robert C. Abernethy | 57,300 | -- | -- | -- | 6,625 | -- | 63,925 | | Douglas S. Howard | 50,250 | -- | -- | -- | 7,511 | -- | 57,761 | | John W. Lineberger, Jr. | 45,500 | -- | -- | -- | 6,329 | -- | 51,829 | | Gary E. Matthews | 41,850 | -- | -- | -- | 10,970 | -- | 52,820 | | Billy L. Price, Jr., M.D. | 47,550 | -- | -- | -- | 9,922 | -- | 57,472 | | Larry E. Robinson | 40,500 | -- | -- | -- | 6,329 | 5,000 | 51,829 | | William Gregory Terry | 45,500 | -- | -- | -- | 3,677 | -- | 49,177 | | Dan Ray Timmerman, Sr. | 46,700 | -- | -- | -- | 6,329 | -- | 53,029 | | Benjamin I. Zachary | 45,500 | -- | -- | -- | 9,965 | -- | 55,465 | | Kimberly Boyd Leaks | 39,500 | -- | -- | -- | -- | -- | 39,500 |
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| (1) The Company did not grant any plan-based awards to directors during the fiscal year ended December 31, 2023. At December 31, 2023, no director had restricted stock units outstanding. See information above under the heading “Directors Stock Benefit Plan” for information on each individual grant of restricted stock units. | | (2) Change in Pension Value and Nonqualified Deferred Compensation Earnings represents the expense accrued by the Bank for each director under the Directors’ Supplemental Retirement Plan as described above. | | (3) In 2023, Director Larry Robinson received 146 shares of common stock and $992.30 in cash in recognition of 30 years’ service as a director under the Bank’s Service Recognition Program. |
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Indebtedness of and Transactions with Related Persons The Bank provides loans and other credit facilities in the ordinary course of its business to members of our Board, members of the Bank Board, and employees, including executive officers, and businesses in which the foregoing have direct or indirect interests, as well as the immediate family of the foregoing (together, “Related Persons”). In accordance with Federal Reserve Regulation O, the Bank has adopted a policy which sets forth the requirements applicable to such loans and other credit facilities. These loans and other credit facilities are made using the same credit and underwriting standards as are applicable to the general public, and such loans and other credit facilities do not involve more than the normal risk of collectability or present other unfavorable features. Pursuant to this policy, outstanding loans and other credit facilities to Related Persons are made on the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with nonaffiliated persons, and do not involve more than the normal risk of collectability or present to the Bank other unfavorable features. Our Board is charged with reviewing and approving all transactions that either we or the Bank may have from time to time with Related Persons other than transactions subject to Federal Reserve Regulation O, discussed above. All material facts of each transaction and the Related Person’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 any transaction involving a Related Person. Equity Compensation Plan Information The following table sets forth certain information regarding outstanding options and shares for future issuance under the Company’s two equity compensation plans as of December 31, 2023. Individual equity compensation arrangements are aggregated and included within this table. This table excludes any plan, contract or arrangement that provides for the issuance of options, warrants or other rights that are given to our shareholders on a pro rata basis and any employee benefit plan that is intended to meet the qualification requirements of Section 401(a) of the Internal Revenue Code.
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| Plan Category | Number of securities to be issued upon exercise of outstanding options, warrants and rights (1) | Weighted-average exercise price of outstanding options, warrants and rights (2) | 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 | 25,450 | - | 274,550 | | Equity compensation plans not approved by security holders | - | - | - | | Total | 25,450 | - | 274,550 |
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| 1 | Includes: 7,635 restricted stock units granted on May 7, 2020 under the 2020 Omnibus Plan, all of which vest on May 7, 2024; 7,060 restricted stock units granted on February 3, 2021 under the 2020 Omnibus Plan, all of which vest on February 3, 2025; 5,385 restricted stock units granted on January 20, 2022 under the 2020 Omnibus Plan, all of which vest on January 20, 2026; and 5,370 restricted stock units granted on January 19, 2023 under the 2020 Omnibus Plan, all of which vest on January 19, 2027. | | 2 | The restricted stock units granted by the Company under the Omnibus Plans do not have an exercise price. |
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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 16 of this Proxy Statement.
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PROPOSAL 2 RATIFICATION OF SELECTION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM During 2023, our Audit Committee reviewed its relationship with our registered independent public accounting firm, Elliott Davis, PLLC (“Elliott Davis”). While satisfied with Elliott Davis’ audit services, the Audit Committee noted that Elliott Davis had been the Company’s independent auditor since 2015 and that it would be prudent to consider other audit firms. A proposal process was initiated and on February 22, 2024, the Audit Committee approved the engagement of FORVIS as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2024. On February 23, 2024, the Company informed FORVIS of the Committee’s decision, effective following the completion of the 2023 audit. On February 23, 2024, the Company informed Elliott Davis that it would be dismissed as the Company’s independent registered public accounting firm effective upon the completion of the Company’s 2023 audit. Elliott Davis’ reports on the Company’s financial statements for the fiscal years ended December 31, 2022 and 2023, did not contain an adverse opinion or a disclaimer of opinion, and were not qualified or modified as to uncertainty, audit scope or accounting principles. During the fiscal years ended December 31, 2022 and 2023 and through the completion of the Company’s 2023 audit on March 7, 2024, there were (i) no disagreements (as that term is defined in Item 304(a)(1)(iv) of Regulation S-K and the related instructions) between the Company and Elliott Davis on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which, if not resolved to the satisfaction of Elliott Davis would have caused Elliott Davis to make reference thereto in its reports on the consolidated financial statements of the Company for such years, and (ii) no “reportable events” (as that term is defined in Item 304(a)(1)(v) of Regulation S-K). During the fiscal years ended December 31, 2022 and 2023, and in the subsequent interim period through March 7, 2024, neither the Company nor anyone on its behalf consulted with FORVIS regarding either (i) the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on the Company’s financial statements, and no written report nor oral advice was provided to the Company that FORVIS concluded was an important factor considered by the Company in reaching a decision as to any accounting, auditing or financial reporting issue, or (ii) any matter that was either the subject of a disagreement (as defined in Item 304(a)(1)(iv) of Regulation S-K and the related instructions to Item 304 of Regulation S-K) or a reportable event (as defined in Item 304(a)(1)(v) of Regulation S-K). We do not expect that representatives of Elliott Davis will attend the Annual Meeting, while representatives of FORVIS are expected to be present. The representatives will be available to respond to appropriate questions and will be given an opportunity to make any statement they consider appropriate. Audit 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, 2023 and 2022 and fees billed for audit-related services, tax services and all other services rendered, for each of such years.
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| | Year Ended December 31 | | | | 2023 | 2022 | | Audit Fees(1) | $318,757 | $205,592 | | Audit-Related Fees(2) | -- | $13,500 | | Tax Fees(3) | $30,745 | $36,065 | | All Other Fees | -- | -- |
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| (1) For the fiscal year ending December 31, 2023 and 2022, Audit Fees include amounts for the integrated audit of the consolidated financial statements in accordance with the standards of the Public Company Accounting Oversight Board (PCAOB), quarterly reviews, and internal control over financial reporting in accordance with auditing and related professional practice standards established by the American Institute of Certified Public Accountants (AICPA), and the requirements of Section 112 of the Federal Deposit Insurance Corporation Improvement Act (FDICIA). | | (2) Represents amounts for the audit of the Bank’s 401(k) Plan. | | (3) Represents amounts for assistance in the preparation of our various federal, state and local tax returns. |
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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 FORVIS AS THE COMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE FISCAL YEAR ENDING DECEMBER 31, 2024. DATE FOR RECEIPT OF SHAREHOLDER PROPOSALS It is presently anticipated that the 2025 Annual Meeting of Shareholders of the Company will be held on May 1, 2025. In order for shareholder proposals to be included in the Company’s proxy materials for that meeting, such proposals must be received by the Secretary of the Company at the Company’s principal executive office no later than November 27, 2024 and meet all other applicable requirements for inclusion in the Proxy Statement. In the alternative, a shareholder may commence his or her own proxy solicitation and present a proposal from the floor at the 2025 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 10, 2025, of his or her proposal. If the Secretary of the Company is not notified of the shareholder’s proposal by February 10, 2025, the Board of Directors may vote on the proposal pursuant to the discretionary authority granted by the proxies solicited by the Board for the 2025 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, 2023, 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 COMPANY’S ANNUAL REPORT ON 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.
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| | By Order of the Board of Directors, Lance A. Sellers President and Chief Executive Officer | | Newton, North Carolina March 27, 2024 | |
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APPENDIX A ANNUAL REPORT OF PEOPLES BANCORP OF NORTH CAROLINA, INC. [See Attached]
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THE BOARD OF DIRECTORS RECOMMENDS YOU VOTE “FOR” ALL OF THE NOMINEES NAMED ABOVE AS DIRECTORS
The Annual Report to Security Holders is Appendix A to the Proxy Statement for the 2023 Annual Meeting of Shareholders and is incorporated herein by reference. PEOPLES BANCORP OF NORTH CAROLINA, INC.
DIRECTORS AND OFFICERS OF THE COMPANY
DIRECTORS AND OFFICERS OF THE COMPANY
DIRECTORS
DIRECTORS