UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the
Securities Exchange Act of 1934
(Amendment No. )
Filed
by the Registrant x
Filed
by a Party other than the Registrant ¨
Check the appropriate box:
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Preliminary Proxy Statement
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Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
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Definitive Proxy Statement
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Definitive Additional Materials
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Soliciting Material under §240.14a-12
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SELECT
BANCORP, INC.
(Name of registrant as specified in its charter)
(Name of person(s) filing proxy statement,
if other than the registrant)
Payment of Filing Fee (Check the appropriate box):
x
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No fee required.
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Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
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(1)
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Title of each class of securities to which the transaction applies:
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(2)
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Aggregate number of securities to which the transaction applies:
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(3)
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Per unit price or other underlying value of the transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):
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(4)
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Proposed maximum aggregate value of the transaction:
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(5)
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Total fee paid:
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Fee paid previously with preliminary materials.
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Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.
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(1)
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Amount Previously Paid:
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(2)
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Form, Schedule or Registration Statement No.:
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(3)
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Filing Party:
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(4)
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Date Filed:
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SELECT BANCORP,
INC.
700 West Cumberland Street
Dunn, North Carolina 28334
(910) 892-7080
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
and
Notice
of Internet Availability of Proxy Materials
To Be Held
May 25, 2021
NOTICE is hereby given that the Annual Meeting of Shareholders
of Select Bancorp, Inc. (the “Corporation”) will be held as follows:
Place:
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Select Bank & Trust
700 West Cumberland Street
Dunn, North Carolina 28334
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Date:
Time:
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May 25, 2021
10:00 a.m.
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The purposes of the meeting are:
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1.
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Election of Directors. To elect three members of the Board of Directors for terms of three years;
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2.
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Advisory Vote to Approve Named Executive Officer Compensation. To vote on a non-binding, advisory proposal to approve
compensation paid to our named executive officers (commonly referred to as a “say-on-pay” vote);
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3.
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Ratification of Accounting Firm. To ratify the appointment of Dixon Hughes Goodman LLP as the Corporation’s independent
registered public accounting firm for 2021; and
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4.
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Other Business. To transact any other business that may properly come before the meeting.
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You are cordially invited to attend the annual meeting in person.
However, even if you plan to attend, you are requested to complete, sign and date the enclosed appointment of proxy and return it promptly
in the envelope provided for that purpose or to vote via the internet or telephone in order to ensure that a quorum is present at the
meeting. The giving of an appointment of proxy will not affect your right to revoke it or to attend the meeting and vote in person.
We have elected to furnish our proxy solicitation materials via U.S.
mail and also to notify you of the availability of our proxy materials on the internet. The notice of meeting, proxy statement, proxy
card and annual report are available at: www.investorvote.com/SLCT.
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By Order of the Board of Directors
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William L. Hedgepeth II
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President and Chief Executive Officer
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April 6, 2021
Special Note Regarding COVID-19
Given the public health and safety concerns related to the coronavirus
disease 2019, or COVID-19, we ask that each shareholder evaluate the relative benefits to them personally of in-person attendance at the
annual meeting and take advantage of the ability to vote by proxy via internet or telephone, as instructed on the enclosed proxy card.
If you elect to attend in person, we ask that you follow recommended guidance, mandates, and any applicable executive orders from federal,
state, and local authorities, particularly as they relate to social distancing, the wearing of face coverings, and attendance at public
gatherings. If you are not feeling well, have a fever, or think you may have been exposed to COVID-19, we ask that you vote by proxy for
the meeting. Should further developments with COVID-19 necessitate that we change any material aspects of the annual meeting, we will
make public disclosure of such changes. We thank you for your cooperation as we balance both our fondness for shareholder engagement with
the safety of our community and each of our shareholders.
SELECT BANCORP, INC.
700 West Cumberland Street
Dunn, North Carolina 28334
(910) 892-7080
PROXY STATEMENT
Mailing Date: On or about April 6, 2021
ANNUAL MEETING OF SHAREHOLDERS
To Be Held
May 25, 2021
General
This Proxy Statement is furnished in connection
with the solicitation of the enclosed appointment of proxy by the Board of Directors (the “Board”) of Select Bancorp, Inc.
(the “Corporation”) for the Annual Meeting of Shareholders of the Corporation (the “Annual Meeting”) to be held
at our main office located at 700 West Cumberland Street, Dunn, North Carolina 28334, at 10:00 a.m. on May 25, 2021, and any adjournments
thereof.
Solicitation and Voting of Appointments of Proxy; Revocation
Persons named in the appointment of proxy as proxies
to represent shareholders at the Annual Meeting are J. Gary Ciccone, Carlie C. McLamb, Jr., and V. Parker Overton, whom we collectively
refer to herein as the proxies. Shares represented by each appointment of proxy that is properly executed and returned or appointed by
internet or telephone, and not revoked, will be voted in accordance with the directions contained in the appointment of proxy. If no directions
are given, each such appointment of proxy will be voted FOR the election of each of the three nominees for director named in Proposal 1
and FOR Proposals 2 and 3. If, at or before the time of the Annual Meeting, any nominee named in Proposal 1 has become unavailable
for any reason, the proxies will have the discretion to vote for a substitute nominee. On such other matters as may come before the meeting,
the proxies will be authorized to vote shares represented by each appointment of proxy in accordance with their best judgment on such
matters.
An appointment of proxy may be revoked by the shareholder
giving it at any time before it is exercised by filing with Brenda B. Bonner, Vice President and Secretary of the Corporation, a written
instrument revoking it or a duly executed appointment of proxy bearing a later date, or by attending the Annual Meeting and announcing
his or her intention to vote in person.
Expenses of Solicitation
The Corporation will pay the cost of preparing,
assembling and mailing this Proxy Statement and other proxy solicitation expenses. In addition to the use of the mails and the internet,
appointments of proxy may be solicited in person or by telephone by officers, directors and employees of the Corporation and its subsidiary
bank without additional compensation. The Corporation will reimburse banks, brokers and other custodians, nominees and fiduciaries for
their costs in sending the proxy materials to the beneficial owners of the Corporation’s common stock.
Record Date
The close of business on March 26, 2021, has been
fixed as the record date (the “Record Date”) for the determination of shareholders entitled to notice of and to vote at the
Annual Meeting. Only shareholders of record at the close of business on that date will be eligible to vote on the proposals described
herein.
Voting Securities
The voting securities of the Corporation are the
shares of its common stock, par value $1.00 per share, of which 50,000,000 shares are authorized and 17,513,903 shares were outstanding
on the Record Date. There were approximately 1,012 record shareholders of the Corporation’s common stock as of the Record Date.
Each shareholder of the Corporation’s common stock is entitled to one vote for each share held of record on the Record Date for
each director to be elected and for each other matter submitted for voting.
Voting Procedures; Quorum; Votes Required for Approval
Shareholders will not be entitled to vote cumulatively
in the election of directors at the Annual Meeting.
A majority of the shares of common stock of the
Corporation issued and outstanding on the Record Date must be present in person or by proxy to constitute a quorum for the conduct of
business at the Annual Meeting. Assuming a quorum is present, below are voting requirements for each of the proposals:
Proposal 1: Election of Directors. The three
nominees receiving the greatest number of votes will be elected as directors of the Corporation for the terms indicated under the description
of Proposal 1 below.
Proposal 2: Advisory Vote to Approve Named Executive
Officer Compensation. For Proposal 2 to be approved, the number of votes cast for approval must exceed the number of votes cast against
the proposal.
Proposal 3: Ratification of Accounting Firm.
For Proposal 3 to be approved, the number of votes cast for approval must exceed the number of votes cast against the proposal.
Abstentions and broker non-votes will have no effect
on the outcome of the above proposals, other than for purposes of determining whether a quorum is present.
Authorization to Vote on Other Matters
By giving an appointment of proxy, shareholders
will be authorizing the proxies to vote in their best judgment on all other matters that may properly come before the Annual Meeting for
action by the shareholders, including any procedural motions.
Beneficial Ownership of Voting Securities
As of March 26, 2021, no shareholder known to management
beneficially owned more than 5% of the Corporation’s common stock, except as disclosed in the following table.
Name and Address of Beneficial Owner
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Amount and Nature
of Beneficial Ownership
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Percent of Class(1)
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Gregory Blake Stallings (2)
1645 East Arlington Boulevard, Suite E
Greenville, NC 27858
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1,022,855
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5.84
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%
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K. Clark Stallings (3)
1645 East Arlington Boulevard, Suite E
Greenville, NC 27858
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994,509
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5.68
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%
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(1)
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The calculation of the percentage of class beneficially owned is based on a total of 17,513,903 shares of common stock outstanding
as of March 26, 2021.
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(2)
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The amount and nature of beneficial ownership is based on a Schedule 13G filed with the Securities and Exchange Commission (the “SEC”)
on February 28, 2019, and the information contained therein. Beneficial ownership includes 88,235 shares for which Gregory Blake Stallings
has sole voting and investment power. Beneficial ownership also includes 750,186 shares held by The Bill and Faye Stallings Family Trust
II and 184,434 shares held by The Marion Faye Stallings Living Trust. Gregory Blake Stallings is one of two trustees of the foregoing
trusts. The other trustee is K. Clark Stallings, who is a director of the Corporation and brother of Gregory Blake Stallings. Voting and
investment decisions of the trusts require the approval of both trustees. Due to the shared voting and investment power, the shares of
the two trusts are reflected in the beneficial ownership of each trustee in the above table.
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(3)
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Includes the following shares for which K. Clark Stallings has sole voting and investment power: 24,111 shares held individually and
24,648 shares held by trusts for the benefit of his children and for which he is trustee. Beneficial ownership shown also includes 750,186
shares held by The Bill and Faye Stallings Family Trust II and 184,434 shares held by The Marion Faye Stallings Living Trust. Clark Stallings
is one of two trustees of the foregoing trusts. The other trustee is Gregory Blake Stallings, who is a brother of Clark Stallings. Voting
and investment decisions of the trusts require the approval of both trustees. Due to the shared voting and investment power, the shares
of the two trusts are reflected in the beneficial ownership of each trustee in the above table. Lastly, the reflected beneficial ownership
includes 2,000 shares owed by Clark Stallings’s spouse, for which voting and investment power is deemed shared.
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As of March 26, 2021, the beneficial ownership
of the Corporation’s common stock, by directors and executive officers individually, and by directors and executive officers as
a group, was as follows:
Name of Beneficial Owner
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Amount and Nature
of Beneficial Ownership (1) (2)
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Percent of Class(3)
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W. Keith Betts
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13,979
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*
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J. Gary Ciccone (4)
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178,829
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1.02
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Alicia Speight Hawk (5)
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42,654
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*
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Gerald W. Hayes
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154,678
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*
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William L. Hedgepeth II
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112,947
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*
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Ronald V. Jackson
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68,970
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*
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Mark. A Jeffries
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10,360
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*
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Lynn H. Johnson
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12,280
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*
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John W. McCauley
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84,472
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*
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Carlie C. McLamb, Jr. (6)
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116,100
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*
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V. Parker Overton
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164,714
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*
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Sharon L. Raynor (7)
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294,193
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1.68
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%
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K. Clark Stallings (8)
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994,509
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5.68
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%
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W. Lyndo Tippett (9)
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47,485
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*
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D. Richard Tobin, Jr.
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6,860
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*
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All Directors and Executive Officers as a group (15 persons)
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2,303,030
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13.05
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%
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________________________
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*
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Represents beneficial ownership of less than one percent of the class.
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(1)
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Except as otherwise noted, to the best knowledge of the Corporation’s management, the above individuals and group exercise sole
voting and investment power with respect to all shares shown as beneficially owned other than the following shares as to which such powers
are shared: Mrs. Hawk – 25,088 shares; Mr. Hedgepeth – 13,580 shares; Mr. Jackson – 35,857 shares; Mrs. Raynor –
72,958 shares; and Mr. Tippett – 18,185 shares.
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(2)
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Included in the beneficial ownership tabulations are the following shares underlying options to purchase shares of common stock of
the Corporation that were outstanding and exercisable as of March 26, 2021 (or will become exercisable within 60 days of such date): Mr.
Betts – 7,360 shares; Mr. Ciccone – 4,200 shares; Mrs. Hawk – 9,404 shares; Mr. Hayes – 4,200 shares; Mr. Hedgepeth
– 48,400 shares; Mr. Jackson – 4,200 shares; Mr. Jeffries – 7,860 shares; Ms. Johnson – 12,180 shares; Mr. McCauley
– 4,200 shares; Mr. McLamb – 4,200 shares; Mr. Overton – 9,496 shares; Mrs. Raynor – 4,200 shares; Mr. Stallings
– 9,130 shares; Mr. Tippett – 4,200 shares; and Mr. Tobin – 6,160 shares; and for all directors and executive officers
as a group – 139,390 shares.
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(3)
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The calculation of the percentage of class beneficially owned by each individual and the group is based on
the sum of (i) a total of 17,513,903 shares of common stock outstanding as of March 26, 2021, and (ii) options to purchase shares of common
stock which are exercisable as of or within 60 days of March 26, 2021.
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(4)
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Includes 5,396 shares owned by Mr. Ciccone’s spouse.
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(5)
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Includes 3,078 shares held as custodian for
children.
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(6)
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Includes 29,337 shares owned by Mr. McLamb’s
spouse.
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(7)
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Includes 180,094 shares
owned by Mrs. Raynor’s spouse.
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(8)
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Includes the following shares for which Mr. Clark Stallings has sole voting and investment power: 24,111 shares held individually
and 24,648 shares held by trusts for the benefit of his children and for which he is trustee. Beneficial ownership shown also includes
750,186 shares held by The Bill and Faye Stallings Family Trust II and 184,434 shares held by The Marion Faye Stallings Living Trust.
Clark Stallings is one of two trustees of the foregoing trusts. The other trustee is Gregory Blake Stallings, who is a brother of K. Clark
Stallings. Voting and investment decisions of the trusts require the approval of both trustees. Lastly, the reflected beneficial ownership
includes 2,000 shares owed by Clark Stallings’s spouse, for which voting and investment power is deemed shared.
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(9)
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Includes 1,742 shares owned by Mr. Tippett’s spouse.
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PROPOSAL 1: ELECTION OF DIRECTORS
The Board has set the number
of directors of the Corporation at eleven (11) and recommends that shareholders vote for the nominees listed below each for a term of
three years.
Name and Age
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Length of Term Nominated
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Position(s)
Held
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Director
Since(1)
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Principal Occupation and
Business Experience During the Past Five Years
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Alicia Speight Hawk
(54)
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3 years
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Director
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2014
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Director of Advancement, The Oakwood School (college preparatory school), Greenville, NC
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John W. McCauley
(53)
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3 years
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Director
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2003
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Chief Executive Officer, Highland Paving Co, LLC; General Manager, McCauley McDonald Investments, Inc. (commercial real estate firm), Fayetteville, NC
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Sharon L. Raynor
(63)
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3 years
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Director
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2009
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President and Director, LIFE, Inc. (provider of long-term care for developmentally disabled consumers), Goldsboro, NC
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(1)
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Reflects the year during which the individual first became a director of the Corporation.
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THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE “FOR”
EACH OF THE NOMINEES FOR DIRECTOR LISTED ABOVE FOR TERMS OF THREE YEARS EACH.
Incumbent Directors
The Corporation’s Board of Directors includes
the following directors whose terms will continue after the Annual Meeting. Certain information regarding those directors is set forth
in the following table.
Name and Age
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Position(s)
Held
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Term
Expires
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Director
Since(1)
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Principal Occupation and
Business Experience During the Past Five Years
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J. Gary Ciccone
(74)
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Chairman
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2022
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2003
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Real estate developer; Co-owner and Vice President, Nimocks, Ciccone & Townsend, Inc. (commercial real estate brokerage)
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Ronald V. Jackson
(79)
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Director
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2022
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2012
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Retired; Former President, Clinton Truck and Tractor Company
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V. Parker Overton
(76)
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Director
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2022
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2014
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Real estate developer; Founder, Overton’s Sports Center
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K. Clark Stallings
(53)
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Director
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2022
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2014
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Vice President, Stallings Group, Ltd., Greenville, NC
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W. Lyndo Tippett
(81)
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Director
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2022
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2008
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Certified Public Accountant
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Gerald W. Hayes
(77)
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Director
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2023
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2003
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President and Managing Partner, Hayes, Williams, Turner & Daughtry, P.A. (law practice)
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William L. Hedgepeth II
(59)
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Director,
President
and CEO
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2023
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2007
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President and Chief Executive Officer, Select Bancorp, Inc. and Select Bank & Trust since 2007
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Carlie C. McLamb, Jr.
(56)
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Director
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2023
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2010
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President, Carlie C’s Operation Center, Inc., d/b/a Carlie C’s IGA (grocery stores)
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(1) Reflects the year during
which the individual first became a director of the Corporation.
Qualifications of Directors
A description of the specific experience, qualifications,
attributes, or skills that led to the conclusion that each of the nominees and incumbent directors listed above should serve as a director
of the Corporation is presented below. In July 2014, the Corporation (then known as New Century Bancorp, Inc.) merged with Select Bancorp,
Inc., Greenville, NC, with the Corporation being renamed Select Bancorp, Inc. following the merger. Similarly, the Corporation’s
subsidiary bank (then known as New Century Bank) merged with Select Bank & Trust Company, Greenville, NC, with the Corporation’s
subsidiary bank being renamed Select Bank & Trust Company. For ease of reference, when we refer to either of the former Greenville-based
entities in describing our directors’ experience, we so indicate by adding “Greenville” in parenthetical following the
respective entity’s name.
J. Gary Ciccone. Mr. Ciccone has served
as chairman of the board of directors of the Corporation and its subsidiary bank since April 2008. He was a founding director of New Century
Bank of Fayetteville, serving as chairman of the board of that institution from inception until its merger with the Corporation’s
subsidiary bank in March 2008. Mr. Ciccone retained the title of chairman following the 2014 mergers of the Corporation and its subsidiary
bank with Select Bancorp (Greenville) and Select Bank & Trust (Greenville). Mr. Ciccone has completed the North Carolina Bank Directors’
College and Advanced Bank Directors’ College programs. As co-owner and vice president of Nimocks, Ciccone & Townsend in Fayetteville,
he has extensive experience in real estate development and commercial real estate brokerage. Mr. Ciccone also has prior experience as
a bank director, serving on the board of directors and as secretary of New East Bank of Fayetteville. He served on the Board of Trustees
of Fayetteville Technical Community College from 2005 to 2009 and on the North Carolina Board of Transportation from November 2009 to
October 2011. Mr. Ciccone holds a Bachelor of Science in Business Administration from the University of North Carolina at Chapel Hill
and a law degree from the University of North Carolina School of Law, Chapel Hill, NC. He was engaged in the active practice of law from
1975 to 1996 and is a member of the North Carolina State Bar.
Alicia S. Hawk. Mrs. Hawk was a founding
director of Select Bank & Trust (Greenville) and Select Bancorp (Greenville), serving as vice chair from 2004 to 2014. She has
completed the North Carolina Bank Directors’ College. Mrs. Hawk has served as the Director of Advancement for The Oakwood
School in Greenville, NC since 2012. From 2006 to 2012, Mrs. Hawk was a member of the Board of Trustees at The Oakwood School and
served as President from 2009 to 2012. As a former licensed real estate broker, Mrs. Hawk has extensive experience in real estate development,
management, and brokerage, having served as a real estate asset manager for Speight Properties in Greenville, NC from 2004 to 2012. Mrs.
Hawk also has over ten years of consulting engineering experience with CDM Smith in Raleigh, NC and Atlanta, GA and was previously a NC
Registered Professional Engineer. She holds a Bachelor of Science degree in Civil Engineering and a Masters of Civil Engineering
from North Carolina State University in Raleigh, NC.
Gerald W. Hayes. Mr. Hayes was a
founding director of New Century Bank and New Century Bancorp and has served as a member of the board of directors since inception.
Mr. Hayes is chairman of the Compensation Committee. He has completed the North Carolina Bank Directors’ College. Mr. Hayes is
the president and managing partner of Hayes, Williams, Turner & Daughtry, P.A. and has practiced law in Harnett County for over
50 years, providing the board with excellent perspective on legal issues and the Harnett County market area in general. He is also a
member and co-owner of Chicora Golf Club in Dunn. Mr. Hayes holds a Bachelor of Arts degree from the University of North Carolina at
Chapel Hill where he majored in Economics and a law degree from Wake Forest University Law School, Winston-Salem, NC.
William L. Hedgepeth II. Mr. Hedgepeth has
served as the President and Chief Executive Officer of the Corporation and its subsidiary bank since 2008. Prior to that, he served as
president and chief executive officer of New Century Bank South (formerly known as New Century Bank of Fayetteville). Mr. Hedgepeth has
more than 37 years of experience in banking. He has completed the North Carolina Bank Directors’ College and Advanced Bank Directors’
College programs, as well as the North Carolina Bankers Association’s (“NCBA”) Advanced Management Program. He served
on the Board of Directors of the NCBA from 2008 to 2010 and currently serves on the NCBA’s Legislative and Regulatory Committee.
In 2017, he completed The BB&T Leadership Institute’s Mastering Leadership Dynamics. Mr. Hedgepeth was appointed by North Carolina
Governor Roy Cooper to serve on the Fayetteville Technical Community College board of trustees for a 4-year term beginning in 2017. He
also serves on the Greater Fayetteville Chamber of Commerce Board and the United Way of Cumberland County Board. Mr. Hedgepeth serves
on the Vision 2026 board of directors in Fayetteville/Cumberland County and on the Highland Country Club Board of Directors. In addition,
Mr. Hedgepeth currently serves on the American Bankers Association 2020 Membership Council and the Community Depository Institutions Advisory
Council of the Federal Reserve Bank of Richmond. Mr. Hedgepeth holds a Bachelor of Arts degree from the University of North Carolina at
Chapel Hill.
Ronald V. Jackson. Mr. Jackson served on
the New Century Bank board of directors in 2002, and on the Dunn and Clinton Advisory Boards. He has served on the Corporation’s
and its subsidiary bank’s boards since 2012. Mr. Jackson currently serves as chairman of the Nominating Committee. Prior to his
retirement in November 2020, Mr. Jackson spent 49 years owning and operating Clinton Truck and Tractor Company. Prior to joining Clinton
Truck and Tractor, he worked for International Harvester. He has completed the North Carolina Bank Directors’ College. A graduate
of North Carolina State University in Raleigh, NC, he received his degree in agricultural engineering.
John W. McCauley. Mr. McCauley was a founding
member of New Century Bank of Fayetteville and has served as a member of the Corporation’s and its subsidiary bank’s boards
of directors since 2004. He serves as chairman of the bank’s Loan Committee. Mr. McCauley is chief executive officer of Highland
Paving Co., LLC, which is a highway construction firm engaged primarily in the manufacture and placement of hot mix asphalt. He also is
general manager of McCauley-McDonald Investments, Fayetteville, NC, which owns and leases approximately 70 commercial properties in North
Carolina. He has completed the North Carolina Bank Directors’ College and holds a Bachelor of Science in Economics from Davidson
College, Davidson, NC and a law degree from the University of North Carolina School of Law, Chapel Hill, NC.
Carlie C. McLamb, Jr. Mr. McLamb has served
on the Corporation’s and its subsidiary bank’s boards of directors since 2010. Mr. McLamb is president of Carlie C’s
IGA, a retail supermarket chain with numerous stores. Mr. McLamb was a founding director of Computer World Inc. and has served as a director
and former chairman of the board of that company. In addition, he is currently serving on the board of directors for the North Carolina
Retail Merchants Association and as a trustee of Campbell University. Mr. McLamb has completed the North Carolina Advanced Bank Directors’
College program. Mr. McLamb is a past President of the Carolina Food Industry Council.
V. Parker Overton. Mr. Overton was a
founding member of Select Bank & Trust (Greenville) and Select Bancorp (Greenville), NC where he served as chairman of the board
from 2005 to July 2014. He currently serves as chairman of the bank’s Building Committee. Mr. Overton is the founder of
Overton’s, the world’s largest catalog of watersports and boating supplies. He was president of the NC State Veterinary
Medical Foundation for three years and also served as chairman of the investment committee for 7 years. He served on the Home
Federal Savings and Loan board from 1986 to 1991. He currently serves as an ambassador of Vidant Medical Foundation and also serves
on the investment committee of the Randall Terry Foundation for North Carolina State University. He previously served three years as
chairman of the finance committee at the former University Health Foundation. Mr. Overton was a founding director and served on the
board of Metrics Pharmaceuticals from 1999 until 2012. Mr. Overton has also served on the board of commissioners for the Greenville
Utilities Commission since 2015 and is currently the Commission’s chairman. He is also active in the commercial real estate
business, and he is also a pilot typed in three different jets.
Sharon L. Raynor. Mrs. Raynor has served
as a director of the Corporation and its subsidiary bank since 2005. She currently chairs the bank’s asset-liability, or ALCO, Committee.
She has completed the North Carolina Bank Directors’ College. She is president, a director, and an owner of LIFE, Inc., a provider
of intermediate care for the developmentally disabled for area mental health agencies throughout eastern North Carolina. She is also an
investor and partner in the hospitality industry. Mrs. Raynor is very involved in the bank’s local community, serving as an active
member of Divine Street United Methodist Church, a member of the Lucknow Garden Club, and formerly on the Dunn Schools’ advisory
board. She worked in the public schools for seven years as a teacher of students with intellectual developmental disabilities. She served
on the Governor’s Council of Exceptional Children, having been appointed by former North Carolina Governor James B. Hunt. She has
served several terms on the Professional Advisory Board for the School of Education at East Carolina University. She currently serves
on the executive committee of the East Carolina University Educational Foundation, Inc. Mrs. Raynor holds a Bachelor of Science in Special
Education from East Carolina University, Greenville, NC.
K. Clark Stallings. Mr. Stallings served
as a director of Select Bank & Trust (Greenville) and Select Bancorp (Greenville) prior to joining the Corporation’s board of
directors in 2014. He has completed the North Carolina Bank Directors’ College. He is Vice President of Stallings Group Ltd., and
he is active in different businesses including auto & consumer finance, automobile auction, auto dealer floor plan financing, Jersey
Mike’s Subs restaurants, and commercial income producing real estate. Mr. Stallings is co-founder of Hope of Glory Ministries, a
faith-based community outreach to help people through empowerment programs designed to relieve financial burdens, teach biblical wisdom
of work, money, and wellness, and encourage individuals towards a self-sufficient life in Christ. He is a 1989 graduate of East Carolina
University, Greenville, NC, with a degree in business management.
W. Lyndo Tippett. Mr. Tippett was a
founding director of New Century Bank of Fayetteville (2003–2008) and has served as a member of the Corporation’s and
its subsidiary bank’s boards of directors since 2008. He has completed the North Carolina Bank Directors’ College
program. Mr. Tippett has been a certified public accountant for over 45 years and is a member of the American Institute of Certified
Public Accountants and the North Carolina Association of Certified Public Accountants. He was a partner in the accounting firm of
Tippett Bryan & Merritt, CPAs, Fayetteville, NC from 1976 to 2015 and currently practices as W. Lyndo Tippett, CPA (sole
proprietorship). Additionally, Mr. Tippett served as Secretary of Transportation for the State of North Carolina from 2001 through
2009 and served as a member of the North Carolina Board of Transportation for eight years prior to becoming secretary. He served as
a director of the North Carolina State Health Plan for Teachers and State Employees from 2009 through 2011. He was chief executive
officer of Bybon, Inc., a manufacturing, retail and real estate concern, from 1970 through 1976. He previously served as a staff
accountant with Ernst & Young. Mr. Tippett holds a Bachelor of Science in accounting from Barton College. He also has prior
experience as a bank director, having served on the board of State Bank, Fayetteville, NC and on the local advisory board for First
Citizens Bank.
Board Leadership Structure
The Board of Directors appoints a chairman, who
presides at meetings of the Board and performs such other duties as may be directed by the Board. The Board may select any of its members
as its chairman, and it has no formal policy as to whether the Corporation’s chief executive officer will serve as chairman or whether
any other director, including a non-employee or independent director, may be elected to serve as chairman. The positions of chief executive
officer and chairman are currently held by different persons. At this time, the Board has determined that separating these roles and having
an independent director serve as chairman of the Board is in the best interests of our shareholders. The Board believes this division
of responsibility facilitates communication between the Board and executive management and is appropriate given the legal and regulatory
requirements applicable to the Corporation.
Board’s Role in Risk Oversight
Risk is inherent in any business, and, as is the
case with other management functions, the Corporation’s senior management has primary responsibility for managing the risks faced
by the Corporation. However, as a financial institution, the Corporation’s business involves financial risks that do not exist or
that are more extensive than the risks that exist in some other types of businesses. The Corporation and its subsidiary bank are subject
to extensive regulation that requires us to assess and manage those risks, and our regulators assess our performance in managing those
risks during their periodic examinations. As a result, the Board is actively involved in overseeing our risk management programs.
The Board administers its oversight function primarily
through committees. Additional information regarding the Board’s committees appears below. The Board approves and periodically reviews
the Corporation’s operating policies and procedures. We believe the Board’s involvement in our risk management results in
Board committees that are more active than those of corporations that are not financial institutions or that are not regulated as extensively
as financial institutions. We believe this committee activity enhances our Board’s effectiveness and leadership structure by providing
opportunities for non-employee directors to become familiar with the bank’s critical operations and actively involved in the Board’s
oversight role with respect to risk management, as well as its other oversight functions.
Policies and Practices related to Hedging Activity of Corporation
Securities
The Corporation has not adopted any formal practices
or policies regarding the ability of the Corporation’s employees, officers, or directors (or any of their designees), to purchase
financial instruments (including prepaid variable forward contracts, equity swaps, collars, and exchange funds), or otherwise engage in
transactions that hedge or offset, or are designed to hedge or offset, any decrease in the market value of the Corporation’s capital
stock (i) granted to the employee or director as part of the individual’s compensation or (ii) held, directly or indirectly, by
such employee or director.
Director Independence
With the exception of Mr. Hedgepeth, each
member of the Corporation’s Board of Directors is “independent” as defined by NASDAQ listing standards and the
regulations promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). In making this
determination, the Board considered certain insider transactions with directors for the provision of goods or services to the
Corporation and its subsidiary bank. All such transactions were conducted at arm’s length upon terms no less favorable than
those that would be available from an independent third party.
Director Relationships
No director of the Corporation is, or has in the
last five years been, a director of any other company with a class of securities registered pursuant to section 12 of the Exchange Act
or subject to the requirements of section 15(d) of the Exchange Act, or any company registered as an investment company under the Investment
Company Act of 1940, as amended.
There are no family relationships among directors,
nominees or executive officers of the Corporation.
Meetings and Committees of the Board of Directors
The Corporation’s Board
of Directors held eleven meetings during 2020. None of the Corporation’s directors attended fewer than 75% of all board meetings
and the meetings of any committee(s) of which he or she was a member.
It is the policy of the Corporation
that directors attend each annual meeting of shareholders. All of the Corporation’s Board of Directors then in office attended the
2020 Annual Meeting of Shareholders. The Corporation’s Board has several standing committees including an Audit and Risk Management
Committee, a Nominating Committee and a Compensation Committee.
Audit and Risk
Management Committee. The current members of the Audit and Risk Management Committee are J. Gary Ciccone, Ronald V. Jackson, K. Clark
Stallings, and W. Lyndo Tippett (chairman). The members of the committee are “independent” as defined by NASDAQ listing standards
and the regulations promulgated under the Exchange Act and are financially literate. The Audit and Risk Management Committee met seven
times during 2020. The Board of Directors has adopted a written Audit and Risk Management Committee Charter, which is available under
the Investor Overview tab in the Investor Relations section of our website, www.selectbank.com. The report of the Audit and Risk Management
Committee is included below following the discussion of Proposal 3.
The Board of Directors has determined
that W. Lyndo Tippett, a member of the Audit and Risk Management Committee, meets the requirements adopted by the SEC for qualification
as an “audit committee financial expert.” An audit committee financial expert is defined as a person who has the following
attributes: (i) an understanding of generally accepted accounting principles and financial statements; (ii) the ability to assess the
general application of Generally Accepted Accounting Principles (U.S.) in connection with the accounting for estimates, accruals and reserves;
(iii) experience preparing, auditing, analyzing or evaluating financial statements that are of the same level of complexity that can be
expected in the registrant’s financial statements, or experience supervising people engaged in such activities; (iv) an understanding
of internal controls and procedures for financial reporting; and (v) an understanding of audit committee functions.
Nominating Committee. The duties of the Nominating
Committee are: (i) to assist the Board of Directors, on an annual basis, by identifying individuals qualified to become board members,
and to recommend to the Board the director nominees for the next meeting of shareholders at which directors are to be elected; and (ii)
to assist the Board of Directors by identifying individuals qualified to become board members, in the event that a vacancy on the Board
exists and that such vacancy should be filled.
The current members of the Nominating
Committee are J. Gary Ciccone, Gerald W. Hayes, Ronald V. Jackson (chairman), and Carlie C. McLamb, Jr., each of whom is
“independent” as defined by NASDAQ listing standards and applicable SEC rules and regulations. The nominating committee
met once during 2020. The Bylaws of the Corporation state that candidates may be nominated for election to the Board of Directors by
the Nominating Committee or by any shareholder of the Corporation’s common stock. It is the policy of the Nominating Committee
to consider all shareholder nominations. Shareholder nominations must be submitted to the Nominating Committee in writing on or
before September 30th of the year preceding the annual meeting at which the nominee would stand for election to the Board
of Directors and must be accompanied by each nominee’s written consent to serve as a director of the Corporation if elected.
The Bylaws of the Corporation require that all nominees for director, including shareholder nominees, have business, economic or
residential ties to the Corporation’s market area. In evaluating nominees for director, the Nominating Committee values
community involvement and experience in finance or banking including prior service as an officer or director of an entity engaged in
the financial services business, although such experience is not a prerequisite for nomination. Although there is not currently a
formal policy requiring that the Nominating Committee consider diversity in its identification of nominees to the Board of
Directors, the committee values diversity, including diversity of background, experience and expertise.
The Board of Directors has adopted a written Nominating
Committee charter that is reviewed annually for adequacy and which is available under the Investor Overview tab in the Investor Relations
section of our website, www.selectbank.com. Each of the nominees for election to the Board of
Directors included in this proxy statement was nominated by the Nominating Committee.
Compensation Committee. The current members
of the Compensation Committee are J. Gary Ciccone, Gerald W. Hayes (chairman), Alicia S. Hawk, John W. McCauley, and V. Parker Overton.
The Compensation Committee meets on an as-needed basis to review the salaries and compensation programs required to attract and retain
the Corporation’s executive officers. The Compensation Committee met three times during 2020. The Committee approves the compensation
of the President and Chief Executive Officer. The compensation of officers that report to the President, including the Chief Financial
Officer, Chief Banking Officer, Chief Operating Officer and Chief Credit Officer, is recommended by the President and Chief Executive
Officer based on such officer’s experience, managerial effectiveness, contribution to the Corporation’s overall profitability,
maintenance of regulatory compliance standards and professional leadership. The Committee compares the compensation of the Corporation’s
executive officers with compensation paid to executives of similarly situated bank holding companies, other businesses in the Corporation’s
market area, and appropriate state and national salary data. The Committee is not bound by recommendations made by the President and
Chief Executive Officer. Furthermore, the President and Chief Executive Officer does not have any input into his own compensation. The
Compensation Committee also engages third-party compensation consultants on occasion to assist in determining executive pay or additional
benefits, but does not delegate its duties. Please see the discussion below under the heading “Compensation Discussion and Analysis”
for a detailed discussion of our compensation programs and practices.
The Board of Directors has adopted a written Compensation
Committee charter, which is available under the Investor Overview tab in the Investor Relations section of the Corporation’s website,
www.selectbank.com.
Compensation Committee Interlocks and Insider Participation
During 2020, no member of the Compensation Committee
was an officer or employee of the Corporation, and none of the members of the Compensation Committee during the last fiscal year has ever
been an officer of the Corporation. There were no interlocking relationships during the last fiscal year that require disclosure under
applicable SEC rules.
Transactions with Related Persons
Policies and Procedures. Under its charter,
the Audit and Risk Management Committee is charged with the responsibility of reviewing, approving and/or ratifying all transactions with
“related persons,” as such term is defined under Item 404 of SEC Regulation S-K. The term “related person” is
defined to include:
|
·
|
any director or executive officer of the Corporation;
|
|
·
|
any immediate family member of a director or executive officer, which includes
parents, children, stepparents, stepchildren, spouses, siblings and in-laws;
|
|
·
|
any shareholder owning more than five percent of our common stock; and
|
|
·
|
any immediate family member of a more than five percent holder of our common
stock.
|
Indebtedness of and Transactions with Management.
The Corporation’s bank subsidiary, Select Bank & Trust Company, has had, and expects to have in the future, banking and other
transactions in the ordinary course of business with certain of its current directors, nominees for director, executive officers and
associates. All such transactions are made on substantially the same terms, including interest rates, repayment terms and collateral,
as those prevailing for comparable transactions with persons not related to the lender, and do not involve more than the normal risk
of collection or present other unfavorable features. Loans made by Select Bank & Trust Company to directors and executive officers
are subject to the requirements of Regulation O of the Board of Governors of the Federal Reserve System. Regulation O requires, among
other things, prior approval of the Board of Directors with any “interested director” not participating, dollar limitations
on amounts of certain loans and prohibits any favorable treatment being extended to any director or executive officer in any of the bank’s
lending matters.
Executive
Compensation AND RELATED MATTERS
Executive Officers
The following table sets forth certain information
regarding the Corporation’s current executive officers. These five executive officers are our “named executive officers”
for the 2020 fiscal year.
Name
|
Age
|
Position with Corporation
|
Business Experience
|
William
L. Hedgepeth II
|
59
|
President
and Chief Executive Officer
|
President
and Chief Executive Officer of the Corporation and its subsidiary bank, 2007-Present.
|
W. Keith Betts
|
64
|
Executive Vice President and
Chief Banking Officer
|
Executive Vice President and Chief Banking Officer of the Corporation and its subsidiary bank, 2017-Present; Regional Executive, Select Bank & Trust, 2016; President and Chief Executive Officer, Port City Capital Bank, Wilmington, NC, 2001-2006.
|
Mark A. Jeffries
|
65
|
Executive Vice President and
Chief Financial Officer
|
Executive Vice President and Chief Financial Officer of the Corporation and its subsidiary bank, 2014-Present; Executive Vice President and Chief Financial Officer, Millennium Bank, NA and its parent company, Millennium Bankshares Corporation, Sterling, VA, 2009-2014.
|
Lynn H. Johnson
|
58
|
Executive Vice President and
Chief Operating Officer
|
Executive Vice President and Chief Operating Officer of the Corporation and its subsidiary bank, 2017-Present; Executive Vice President and Chief Administrative Officer of the Corporation and its subsidiary bank, 2014-2017; Corporate Ethics Officer and Senior Vice President, Select Bank & Trust (formerly New Century Bank), 2011-2014.
|
D. Richard Tobin, Jr.
|
64
|
Executive Vice President and
Chief Credit Officer
|
Executive Vice President and Chief Credit Officer of the Corporation and its subsidiary bank, 2012-Present; Senior Vice President and Senior Credit Administrator, Select Bank & Trust (formerly New Century Bank), 2008-2012.
|
Compensation Discussion and Analysis
This Compensation Discussion and Analysis is intended
to assist our shareholders in understanding the Corporation’s compensation programs. It presents and explains the philosophy underlying
our compensation strategy and the fundamental elements of compensation paid to our named executive officers (collectively, “named
executive officers” or “NEOs”) whose 2020 compensation information is provided in the tables following this discussion.
Our 2020 NEOs are the following:
|
William L. Hedgepeth II
|
President and Chief Executive Officer
|
|
W. Keith Betts
|
Executive Vice President and Chief Banking Officer
|
|
Mark A. Jeffries
|
Executive Vice President and Chief Financial Officer
|
|
Lynn H. Johnson
|
Executive Vice President and Chief Operating Officer
|
|
D. Richard Tobin, Jr.
|
Executive Vice President and Chief Credit Officer
|
Specifically, this Compensation Discussion and Analysis addresses the
following:
|
·
|
certain relevant 2020 business performance highlights;
|
|
·
|
our compensation philosophy and the objectives of our compensation programs;
|
|
·
|
what our compensation programs are designed to reward;
|
|
·
|
our process for determining executive officer compensation, including:
|
— the role and responsibility of the Compensation Committee;
— the role of the Chief Executive Officer and other
named executive officers;
— the role of compensation consultants; and
— benchmarking and other market analyses;
|
·
|
elements
of compensation provided to our executive officers, including:
|
— the purpose of each element of compensation;
— why we elect to pay each element of compensation;
— how we determine the levels or payout opportunities
for each element; and
— decisions on final payments for each element and
how these align with performance
|
·
|
other
compensation and benefit policies affecting our executive officers.
|
2020 Business Performance Highlights
The following is a list of certain of our 2020
business performance highlights, which are relevant when we consider and evaluate our compensation policies and the effectiveness of our
compensation philosophies.
|
·
|
Net
income for the year ended December 31, 2020 of $8.2 million and basic and diluted earnings per share of $0.46 and $0.45, respectively
compared to net income of $13.0 million and basic and diluted earnings per share of $0.69 and $0.68, respectively for the year ended
December 31, 2019.
|
|
|
|
|
·
|
Total
assets, total deposits, and gross loans for the Corporation as of December 31, 2020 were $1.73 billion, $1.49 billion and $1.30 billion,
respectively, compared to total assets of $1.28 billion, total deposits of $992.8 million, and gross loans of $1.03 billion as of the
same date in 2019.
|
|
|
|
|
·
|
For
the twelve months ended December 31, 2020, return on average assets was 0.52% and return on average equity was 3.81%, compared to 1.03%
and 6.08%, respectively, for the twelve months ended December 31, 2019.
|
|
|
|
|
·
|
Non-performing
loans increased to $14.3 million at December 31, 2020 from $12.1 million at December 31, 2019. Non-performing loans equaled 1.10% of
gross loans at December 31, 2020 and 1.18% at December 31, 2019. Foreclosed real estate equaled $2.2 million at December 31, 2020, compared
to $3.5 million at December 31, 2019.
|
|
|
|
|
·
|
For
the year ended December 31, 2020, net charge-offs were 0.04% of average loans, compared to net charge offs of 0.07% of average loans
in 2019. At December 31, 2020, the allowance for loan losses was 1.08% of total loans, as compared to 0.81% of total loans, at December
31, 2019.
|
|
|
|
|
·
|
Net
interest margin was 3.79% for the year ending December 31, 2020, as compared to 4.04% for the year ending December 31, 2019.
|
When considering such results, we do not view such
results in isolation and believe it is important to consider trends, anomalies, and strategic initiatives so that long-term shareholder
interests can be appropriately aligned with our compensation practices and philosophies.
The Compensation Committee believes that the most
effective compensation programs strive to accomplish the following objectives:
|
·
|
aligning the interests of the employee with those of the Corporation’s
shareholders;
|
|
·
|
attracting and retaining talented individuals and top performers; and
|
|
·
|
motivating performance toward the achievement of short-term and long-term
goals.
|
To meet these objectives, the Compensation Committee
has carefully structured the Corporation’s compensation programs in the following manner:
|
·
|
base compensation levels benchmarked to, and competitive with, the 50th percentile
of market, defined in terms of geography, company type, and company size, with actual base pay varying in a normal range around the 50th
percentile based on individual performance and other factors;
|
|
|
|
|
·
|
annual incentive compensation that varies in a consistent manner with the
achievement of both the financial and operating objectives of the Corporation and individual performance objectives, which together support
our business strategy;
|
|
|
|
|
·
|
long-term incentive compensation (equity) that balances retention with the
achievement of longer-term (minimum three year) financial and strategic goals;
|
|
|
|
|
·
|
executive benefits that are meaningful and competitive with, and comparable
to, those offered by similar organizations; and
|
|
|
|
|
·
|
an appropriate balance between base pay, short-term incentives, long-term
incentives, and benefits that provides a total target compensation opportunity that generally aligns with the market 50th percentile.
|
In designing and administering the Corporation’s
executive compensation program, the Compensation Committee strives to maintain an appropriate balance across all the various compensation
elements, realizing that at times some objectives may be more difficult to achieve than others, or may even be in conflict with others.
In addition, external factors, such as the general state of the economy and the banking industry or legislative changes impacting executive
compensation, may impact the effectiveness of existing approaches to executive compensation. Such events require ongoing monitoring and
a careful reconsideration of existing approaches by the Compensation Committee. On an annual basis, the Compensation Committee carefully
evaluates and, where appropriate, makes decisions and adjustments to future compensation programs in an effort to consistently implement
the strategic objectives of executive compensation.
Shareholder Outreach
At the 2020 Annual Meeting of Shareholders, approximately
92% of the voting shareholders approved the Corporation’s 2019 executive compensation program for the NEOs. We believe that these
voting results reflect our shareholders’ endorsement and support of our executive compensation program and affirm alignment of our
program with shareholder interests. We continue to maintain an active and open dialogue with our shareholders to identify ways to further
refine and improve our executive compensation program, and the Compensation Committee believes our current program adequately and effectively
addresses shareholder concerns, promotes the Corporation’s business strategy and aligns pay with performance and shareholder value.
Process for Determining Named Executive Officer Compensation
Role of the Compensation Committee. The
Compensation Committee administers the Corporation’s executive compensation program. Throughout 2020, the Compensation Committee
included J. Gary Ciccone, Gerald W. Hayes (chairman), Alicia S. Hawk, John W. McCauley, and V. Parker Overton. The members of the Compensation
Committee all qualify as “independent” directors in accordance with the requirements of NASDAQ and current SEC regulations.
The Compensation Committee is responsible for all
compensation decisions for the Chief Executive Officer and the other NEOs. The Compensation Committee annually reviews the levels of compensation
along with the performance results on goals and objectives relating to compensation for the NEOs. Based on this evaluation, the Compensation
Committee makes decisions related to our executive compensation program with final approval by the Board, except where the Compensation
Committee has otherwise been given final authority with respect to a specific component of compensation. Additionally, the Compensation
Committee periodically reviews our incentive plans and other equity-based plans. The Compensation Committee reviews, adopts and submits
to the Board any proposed arrangement or plan and any amendment to an existing arrangement or plan that provides or will provide benefits
to the executive officers collectively or to an individual executive officer. The Compensation Committee has sole authority to retain
and terminate compensation consultants and other advisors as it deems appropriate.
Compensation Program Risk. While the Compensation
Committee did not formally review whether the compensation arrangements, agreements, and benefit plans of the Corporation made available
to the NEOs and to all other employees of the Corporation unduly encourage those employees to take unnecessary and excessive risks that
could threaten the financial condition of the Corporation, the Compensation Committee firmly believes that the compensation policies and
practices in effect in 2020 did not encourage undue risk taking. The Compensation Committee will in the future review an inventory of
its executive and non-executive compensation programs, with particular emphasis on incentive compensation plans or programs. The Committee
will evaluate, with the assistance of appropriate officers of the Corporation, the primary components of its compensation plans and practices
to identify whether those components, either alone or in combination, properly balance compensation opportunities and risk. The Compensation
Committee will consider various risk-mitigating policies in connection with this analysis, including stock ownership requirements, incentive
compensation, and a claw-back policy. The Committee expects to monitor and periodically evaluate our incentive compensation arrangements,
agreements and benefit plans at least annually, as part of the Corporation’s oversight of risk management for the organization.
Please see the discussion under the heading “Board’s Role in Risk Oversight” on page 9 for additional discussion of
our risk management practices.
Role of the Executive Officers. The Chief
Executive Officer, with the assistance of the Corporation’s Chief Operating Officer, annually reviews the performance of the other
NEOs, after which the Chief Executive Officer presents his conclusions and recommendations to the Compensation Committee for approval.
The Compensation Committee has absolute discretion as to whether it approves the recommendations of the Chief Executive Officer or makes
adjustments, as it deems appropriate. The Chief Executive Officer, Chief Financial Officer and Chief Operating Officer may also work with
the Compensation Committee to gather and compile data needed for benchmarking purposes or for other analysis conducted by the Compensation
Committee’s independent consultants and advisors.
Role of Compensation Consultant. In 2020,
the Compensation Committee engaged Pearl Meyer & Partners, LLC (“Pearl Meyer”) to serve as the Compensation Committee’s
independent compensation consultant. The Compensation Committee has sole authority to retain, terminate and approve the fees of its compensation
consultant. In its role as the Compensation Committee’s independent advisor, Pearl Meyer attended Compensation Committee meetings
and advised on matters including compensation program design, benchmarking of compensation, and relative pay for performance. Pearl Meyer
also provided market data, analyses and advice regarding compensation of our NEOs and other executive officers. Pearl Meyer has not provided
any services to the Corporation other than executive compensation consulting services provided to the Compensation Committee. The Compensation
Committee considered the independence of Pearl Meyer in light of current SEC rules and NASDAQ listing standards and concluded that the
work of Pearl Meyer did not raise any conflict of interest.
Benchmarking. The Compensation Committee
reviews competitive data for comparable executive positions in the market. External market data is used by the Compensation Committee
as a point of reference in its executive pay decisions in conjunction with financial and individual performance data. In considering the
competitive environment, the Compensation Committee reviews compensation information disclosed by a peer group of comparatively sized
companies with which we compete for business and executive talent and information derived from published survey data that compares the
elements of each named executive officer’s target total direct compensation to the market information for executives with similar
roles. The Compensation Committee’s independent compensation consultant compiles this information and size-adjusts the published
survey data to reflect our asset size in relation to the survey participants to more accurately reflect the scope of responsibility for
each named executive officer.
The Compensation Committee, with input from its
independent compensation consultant, annually reviews and selects the peer companies, which generally consist of publicly traded, regional
commercial bank holding companies. For 2020, the peer companies were selected primarily based upon the following criteria: (i) similar
business operations and geographic footprint; (ii) assets and market capitalization between approximately one-half and two and one-half
times our assets and market capitalization; and (iii) competitors for executive talent. For 2020 compensation purposes, our peer group
consisted of the following companies:
Institution Name
|
|
Ticker
|
|
City
|
|
State
|
|
Total Assets
9/30/2020
|
|
American National Bankshares Inc.
|
|
AMNB
|
|
Danville
|
|
VA
|
|
|
2,903,304
|
|
Blue Ridge Bankshares, Inc.
|
|
BRBS
|
|
Charlottesville
|
|
VA
|
|
|
1,523,299
|
|
C&F Financial Corporation
|
|
CFFI
|
|
Toano
|
|
VA
|
|
|
2,080,851
|
|
Capital Bancorp, Inc.
|
|
CBNK
|
|
Rockville
|
|
MD
|
|
|
1,879,029
|
|
Citizens Holding Company
|
|
CIZN
|
|
Philadelphia
|
|
MS
|
|
|
1,374,217
|
|
Colony Bankcorp, Inc.
|
|
CBAN
|
|
Fitzgerald
|
|
GA
|
|
|
1,759,446
|
|
Community Bankers Trust Corporation
|
|
ESXB
|
|
Richmond
|
|
VA
|
|
|
1,622,237
|
|
Community Financial Corporation
|
|
TCFC
|
|
Waldorf
|
|
MD
|
|
|
2,137,437
|
|
ESSA Bancorp, Inc.
|
|
ESSA
|
|
Stroudsburg
|
|
PA
|
|
|
1,893,515
|
|
Eagle Financial Services, Inc.
|
|
EFSI
|
|
Berryville
|
|
VA
|
|
|
1,073,260
|
|
Fidelity D & D Bancorp, Inc.
|
|
FDBC
|
|
Dunmore
|
|
PA
|
|
|
1,711,043
|
|
First Community Bankshares, Inc.
|
|
FCBC
|
|
Bluefield
|
|
VA
|
|
|
2,947,928
|
|
First Community Corporation
|
|
FCCO
|
|
Lexington
|
|
SC
|
|
|
1,381,804
|
|
FNCB Bancorp, Inc.
|
|
FNCB
|
|
Dunmore
|
|
PA
|
|
|
1,443,191
|
|
Franklin Financial Services Corporation
|
|
FRAF
|
|
Chambersburg
|
|
PA
|
|
|
1,511,213
|
|
First National Corporation
|
|
FXNC
|
|
Strasburg
|
|
VA
|
|
|
942,733
|
|
Kentucky Bancshares, Inc.
|
|
KTYB
|
|
Paris
|
|
KY
|
|
|
1,200,539
|
|
MainStreet Bancshares, Inc.
|
|
MNSB
|
|
Fairfax
|
|
VA
|
|
|
1,630,188
|
|
National Bankshares, Inc.
|
|
NKSH
|
|
Blacksburg
|
|
VA
|
|
|
1,435,498
|
|
Partners Bancorp
|
|
PTRS
|
|
Salisbury
|
|
MD
|
|
|
1,543,957
|
|
Peoples Bancorp of North Carolina, Inc.
|
|
PEBK
|
|
Newton
|
|
NC
|
|
|
1,458,609
|
|
Premier Financial Bancorp, Inc.
|
|
PFBI
|
|
Huntington
|
|
WV
|
|
|
1,888,893
|
|
Shore Bancshares, Inc.
|
|
SHBI
|
|
Easton
|
|
MD
|
|
|
1,828,172
|
|
SmartFinancial, Inc.
|
|
SMBK
|
|
Knoxville
|
|
TN
|
|
|
3,387,588
|
|
Security Federal Corp.
|
|
SFDL
|
|
Aiken
|
|
SC
|
|
|
1,129,203
|
|
Southern First Bancshares, Inc.
|
|
SFST
|
|
Greenville
|
|
SC
|
|
|
2,479,411
|
|
Summit Financial Group, Inc.
|
|
SMMF
|
|
Moorefield
|
|
WV
|
|
|
2,946,862
|
|
Virginia National Bankshares Corporation
|
|
VABK
|
|
Charlottesville
|
|
VA
|
|
|
820,958
|
|
Elements of Compensation. The components
of the 2020 executive compensation program, as well as the type of compensation and the objectives of the compensation, are discussed
below:
Base Salary is established to attract and
retain executives, to reward for their level of responsibility and experience, and is reviewed annually by the Compensation Committee
to philosophically and practically target pay levels at the 50th percentile of our peer group.
Short-term (12 months) incentives are a
variable form of compensation established annually to reward executives for the achievement of annual financial and operational goals
and to promote accountability, strategic decision-making and teamwork among the executives.
Long-term incentives are a variable form
of compensation granted to executive management from time to time, and not necessarily every year, to align executive management with
shareholder goals by linking compensation to the achievement of longer term (more than one year) strategic objectives and the increase
in shareholder value. Such incentives are typically satisfied by the delivery of equity ownership in the Corporation and provide a retentive
value of key executives to the Corporation.
Perquisites and Benefits are provided to
our executives primarily for their health and well-being and are competitive with similar types of offerings of banks we compete with
for talent. Certain benefits are provided to assist with completing their responsibilities in the roles they perform for the Corporation.
Retirement Income and Savings are provided
for all employees through our 401(k) retirement savings plan. The objectives of this element of compensation is to serve as a retention
tool, to reward our employees for long-term service and loyalty, and to assist employees with saving for retirement. Beginning in 2019,
we offered two NEOs a supplemental executive retirement plan to assist them with retirement income as a percentage of final base pay
equivalent to that of other long-term employees due to contribution limitations of qualified plans for highly compensated key executives.
Base Salary. It is the
Corporation’s philosophy that employees be paid a base salary that is competitive with the salaries paid by comparable
organizations for comparable jobs based on each employee’s experience, performance and any other unique factors or
qualifications. Generally, the Corporation has chosen to position cash compensation in a range around market median levels in order
to remain competitive in attracting and retaining executive talent. The range is also benchmarked, and employees are paid within the
market-benchmarked range based on their unique situation. Actual base salaries paid vary within a range based on performance over
time. The allocation of total cash compensation between base salary and annual bonus or incentives is based on a variety of factors.
In addition to the market positioning of the base salary and the mix of total compensation, the Compensation Committee also takes into
consideration the following:
|
·
|
the executive’s performance;
|
|
·
|
the performance of the Corporation;
|
|
·
|
the performance of the individual business or corporate function for which
the executive is responsible;
|
|
·
|
the nature and importance of the position and role within the Corporation;
|
|
·
|
the scope of the executive’s responsibility; and
|
|
·
|
the current compensation package in place for the executive, including the
executive’s current annual salary and potential awards under the Corporation’s incentive plan.
|
In December of 2020, the Compensation Committee
reviewed total compensation of named executive officers against market peer data in a study prepared by Pearl Meyer. Cumulative base salaries
for the NEOs were determined to be within 3.0% of peer median, ranging from 92% of the median to 107% of the median.
Named Executive Officer
|
|
Title
|
|
2019 Base Pay
|
|
|
2020 Base Pay
|
|
|
Total Adjustment
|
|
William L. Hedgepeth, II
|
|
Chief Executive Officer
|
|
$
|
391,363
|
|
|
$
|
415,411
|
|
|
|
6.14
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mark A. Jeffries
|
|
Chief Financial Officer
|
|
$
|
230,608
|
|
|
$
|
242,138
|
|
|
|
5.00
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lynn H. Johnson
|
|
Chief Operating Officer
|
|
$
|
229,369
|
|
|
$
|
285,000
|
|
|
|
24.25
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
W. Keith Betts
|
|
Chief Banking Officer
|
|
$
|
227,136
|
|
|
$
|
235,086
|
|
|
|
3.50
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
D. Richard Tobin, Jr.
|
|
Chief Credit Officer
|
|
$
|
225,360
|
|
|
$
|
234,374
|
|
|
|
4.00
|
%
|
Base pay increases for the NEOs in 2020 ranged from 3.50% to 6.14%,
as reflected in the above table, with the exception of our Chief Operating Officer. Ms. Johnson’s base pay was increased 24.25%
due to her increased responsibilities as Chief Operating Officer and the Committee’s compensation philosophy to target pay at the
median of the market relative to competitive peers.
Annual Cash Incentive Plan. The Compensation
Committee believes a formalized incentive plan with well-defined and clearly communicated objectives strengthens the link between performance
and compensation. The Compensation Committee is also interested in continuing to shift the pay mix of NEOs to increase the at-risk portion
of total pay linked to key performance initiatives defined on an annual basis and not as heavily weighted on the guaranteed base salary.
In 2020, a portion of our NEOs’ annual cash
compensation was subject to achievement of pre-established performance targets to ensure alignment of executive compensation, Corporation
performance, and strategic goal attainment. Annual incentive cash payouts reflect the extent to which annual targets for performance goals
are met or exceeded. Targets for performance goals are set with the intent that achievement will ultimately result in enhancement to shareholder
value. When determining the targets, the Compensation Committee considers past financial performance of the Corporation and its internal
estimates of the current year’s planned financial performance. Growth expectations as well as improved profitability and operating
efficiencies are the gauge by which meaningful targets are set and executive performance is measured. In the annual cash incentive plan
effective in 2020, the Compensation Committee used a range of performance levels when setting cash incentive targets. The range establishes
a minimum (Base) level of performance required to earn a cash payout and a maximum (Objective) level required to earn the maximum payout
for that measured performance objective. The performance levels are set relative to the prior fiscal year’s actual results and current
fiscal year projections. Another factor considered when setting the performance levels is the bank’s relative rank (above median)
on key performance indicators when compared to its peers. The Base performance level is the minimum performance level required for any
cash incentive payout, while the Objective level of performance is set at a high level of performance that requires significant efforts
and exceptional execution to achieve.
The individually weighted measured performance
objectives in 2020 for the named executive officers were:
|
·
|
Achievement of pre-tax, pre-incentive net income
|
|
·
|
Growth of average bank-wide loan portfolio
|
|
·
|
Growth of average bank-wide core deposits
|
|
·
|
Maintenance of non-interest income as a specific percentage of revenues
|
|
·
|
Reduction in operating expenses as measured by efficiency ratio
|
|
·
|
Limiting non-performing assets to an acceptable level of total assets
|
|
·
|
Maintaining an acceptable overall regulatory rating
|
Calculating Annual Incentive Awards. Each
year a targeted percentage of base salary will be determined for each NEO as the maximum incentive possible to be earned under the plan.
For 2020, the maximum targeted percentage of base salary that could be earned by each NEO was thirty percent (30%). The formula used to
calculate the payment to be awarded to a named executive officer under the 2020 annual incentive plan was:
Base Salary × Target Percentage of Base Salary
× Company Achievement of Pre-tax, Pre-Incentive Net Income × Percentage Achievement of Weighted Performance Objectives
The 2020 performance goals for short-term incentive
compensation were chosen because each of the goals strongly aligned with the overall business objectives of the Corporation for the year
and with the Corporation’s overall strategic plan. A determination of the earned payouts under the 2020 plan based on actual performance
resulted in a de minimis payout to the NEOs. Therefore, based on the unusual circumstances in 2020 due to the COVID-19 pandemic, the difficult
conditions under which all employees worked and the extraordinary effort and contribution of the executive team, the Committee recommended
and the Board approved a discretionary payout of bonuses to the NEOs.
Long-Term Equity Awards. The Compensation
Committee believes that the Corporation’s executive compensation program should include a meaningful equity-based component because
this best aligns the interests of our executives with those of the Corporation’s shareholders. Our NEOs are eligible to receive
awards under the Corporation’s shareholder-approved 2018 Omnibus Stock Incentive Plan (the “2018 Plan”). Under the 2018
Plan, awards may be granted from time to time and may be in the form of stock options, stock units, stock awards, stock appreciation rights,
and other stock-based awards. Effective with shareholder approval of the 2018 Plan at the Corporation’s 2018 annual meeting of shareholders,
the 2010 Omnibus Stock Ownership and Long Term Incentive Plan (“2010 Plan”) was discontinued, thereby prohibiting any further
grants from the plan. Any outstanding option award previously made under the 2010 Plan continues under the terms of the prior grant until
the individual option award is exercised, terminates, or expires.
The Compensation Committee carefully considers
the following factors when determining the type and amount of equity to award:
|
·
|
prior awards issued to the NEO;
|
|
·
|
the current amount and intrinsic value of unvested equity held by the NEO;
|
|
·
|
current number of shares owned by the NEO;
|
|
·
|
proportion of total compensation on an annual basis consisting of equity
awards; and
|
|
·
|
peer market data on the median level of equity awarded to
comparable positions.
|
The Compensation Committee considers long-term
equity-based compensation to be critical to the alignment of executive compensation with shareholder value creation. Therefore, a market
competitive, long-term equity-based incentive component is an integral part of our overall executive compensation program. Long-term equity
incentive opportunities are established based on competitive market practices. In January of 2020, the Committee granted incentive stock
options to the NEOs. Subject to the continued employment of the option recipient, the incentive stock options will vest ratably over five
(5) years, 20% per year, with the first vesting occurring on the first anniversary of the date of grant. Please see the Summary Compensation
Table and Grants of Plan-Based Awards tables below for additional information on the Corporation’s stock option awards.
Perquisites. We provide our NEOs with customary
perquisites offered to similar executives in our industry, including a company car or travel allowances where necessary and club memberships
for certain NEOs. We view these perquisites as being beneficial to the Corporation, in addition to being directly compensatory to the
executive officers. For example, the club memberships are regularly used in the general course of our business, such as for business meetings
and entertaining. Corporation cars and travel allowances provided to executive officers are used primarily for business purposes. In addition,
these perquisites, as a minor expense to the Corporation, provide a useful benefit in our efforts to recruit, attract, and retain top
executive talent. Additional details on the perquisites that we provide to our NEOs are provided in a supplementary table to the Summary
Compensation Table included below in this Proxy Statement.
Health and Welfare Plans. The named executive
officers are eligible to participate in Corporation-sponsored benefit plans on the same terms and conditions as those generally provided
to salaried employees. Basic health benefits, dental benefits, and similar programs are provided to make certain that access to healthcare
and income protection is available to our employees and their family members. Health benefits also include a Section 125 plan or a health
savings account to provide for pre-tax deferral for non-reimbursable health expenses. The cost of Corporation-sponsored benefit plans
is negotiated with the providers of such benefits, and the executive officers contribute to the cost of the benefits.
Supplemental Retirement Benefits. In addition
to participation in the Corporation’s 401(k) savings plan, two of our named executive officers, Mr. Hedgepeth and Ms. Johnson,
are entitled to certain supplemental retirement benefits under supplemental executive retirement plan (“SERP”) agreements
that were entered into during 2019 with Select Bank & Trust Company. These agreements, which are unfunded and payable from the bank’s
general assets, were put in place to encourage the retention of these key executives and to provide benefits that supplement those that
the executives can otherwise contribute to under the Corporation’s existing retirement plans. See section entitled “2019
Supplemental Executive Retirement Plan Agreements” and accompanying tables below for additional discussion of these supplemental
executive retirement plan agreements.
Employment Agreements
As of December 31, 2020, the Corporation and
Select Bank & Trust Company were party to employment agreements with each of the named executive officers: William L. Hedgepeth
II, Mark A. Jeffries, Lynn H. Johnson, W. Keith Betts, and D. Richard Tobin, Jr. The agreements establish the scope, terms, and
conditions of each employee’s employment by the Corporation and Select Bank & Trust. The following discussion summarizes
the employment agreements as in effect at December 31, 2020, and is qualified in its entirety by reference to the employment
agreements as filed with the Securities and Exchange Commission. Additional quantitative disclosure and discussion regarding the
amounts payable pursuant to the agreements is included in the Summary Compensation Table and related sections that follow, including
the subsection entitled “Potential Payments Upon Termination or Change in Control.”
Employment Agreement with William L. Hedgepeth II
The Corporation has entered into an employment
agreement with William L. Hedgepeth II as its President and Chief Executive Officer, which was in effect during 2020. The employment agreement
includes customary non-competition and confidentiality covenants, establishes Mr. Hedgepeth’s duties and compensation, and provides
for his continued employment with the Corporation.
Base Salary. During 2020, Mr. Hedgepeth
was paid an annual salary of $415,411 under his agreement. Mr. Hedgepeth is also entitled to receive cash bonuses on an annual basis as
determined by the Board of Directors or the Compensation Committee.
Benefits. Mr. Hedgepeth is entitled to participate
in any and all retirement and employee benefit plans maintained by the Corporation on behalf of its employees, as well as fringe benefits
normally associated with Mr. Hedgepeth’s position with the Corporation or made available to all other employees. In addition, the
Corporation has agreed to provide Mr. Hedgepeth with the following benefits:
|
·
|
Five
weeks of paid vacation leave per year;
|
|
·
|
Reimbursement
for reasonable expenses incurred in the performance of his duties under the employment agreement;
|
|
·
|
Payment
of monthly dues associated with membership in a country club;
|
|
·
|
Major
medical insurance, dental insurance and eyecare insurance coverage for Mr. Hedgepeth and his immediate family;
|
|
·
|
Short-
and long-term disability insurance coverage in an amount equal to at least current base salary;
|
|
·
|
Participation
in incentive and bonus compensation plans;
|
|
·
|
Participation
in all savings, pension and retirement plans (including the bank’s 401(k) savings plan); and
|
|
·
|
A monthly
car allowance of $1,000.
|
Term. Mr. Hedgepeth’s employment agreement,
dated January 9, 2008, provides for an initial term of three (3) years, with the term being extended for an additional one year on each
anniversary of the agreement’s signing unless there is an affirmative decision not to renew the contract by the Board of Directors
or by Mr. Hedgepeth given no later than ninety (90) days prior to the anniversary date. Absent notification of non-renewal, the term remaining
on his employment agreement will never be less than 2 years.
Covenants. Mr. Hedgepeth’s
employment agreement also includes certain restrictive covenants that limit Mr. Hedgepeth’s ability to compete with the
Corporation and to solicit, or attempt to solicit, certain customers and any employee of the Corporation and its subsidiaries and
affiliates for a period of twelve months after termination by Mr. Hedgepeth of his employment without good reason or to divulge
certain confidential information concerning the Corporation for any purpose other than as necessary in performance of his duties to
the Corporation. Mr. Hedgepeth’s covenants not to compete contained in the agreement may, in some instances, extend beyond
twelve months or, such as upon a “change in control” of the Corporation, become null and void.
Change in Control Benefits. Mr. Hedgepeth
is also entitled to certain benefits in the event of a change in control of the Corporation. A change in control means any of the following
events:
|
·
|
The
acquisition by any “person” (as such term is defined in section 7(j)(8)(A) of the Change in Bank Control Act of 1978), directly
or indirectly, of beneficial ownership of voting stock representing 25% or more of any class of voting securities of the Corporation,
or the acquisition of control of the election of a majority of the directors of the Corporation;
|
|
·
|
The
consolidation or merger of the Corporation with or into another entity where the Corporation is not the surviving corporation; or
|
|
·
|
The
sale or transfer of all or substantially all of the assets of the Corporation to another entity.
|
If the Corporation terminates Mr. Hedgepeth’s
employment other than for cause or disability or Mr. Hedgepeth terminates his employment following an “adverse change” in
his employment, in either case, within one year after a change in control, then Mr. Hedgepeth will be entitled to receive a lump sum cash
payment equal to 299% of his “base amount,” as that term is defined in section 280G of the Internal Revenue Code of 1986,
as amended (the “Code”).
For purposes of Mr. Hedgepeth’s employment
agreement an “adverse change” includes any of the following events:
|
·
|
If
Mr. Hedgepeth is assigned duties and/or responsibilities that are inconsistent with his position, duties, responsibilities, or status
at the time of the change in control or with his reporting responsibilities or titles with the bank in effect at such time;
|
|
·
|
If
Mr. Hedgepeth’s annual base salary is reduced below the amount in effect as of the effective date of the change in control;
|
|
·
|
If
Mr. Hedgepeth’s life insurance, major medical insurance, disability insurance, dental insurance, stock option plans, stock purchase
plans, deferred compensation plans, management retention plans, retirement plans, or similar plans or benefits being provided by the
Corporation to the executive as of the effective date of the change in control are reduced in their level, scope, or coverage, or any
such insurance, plans, or benefits are eliminated, unless such reduction or elimination applies proportionately to all salaried employees
of the Corporation who participated in such benefits prior to such change in control; or
|
|
·
|
If
Mr. Hedgepeth is transferred or required to report on a daily basis to a location more than 20 miles from Dunn, North Carolina or Fayetteville,
North Carolina, without his express written consent.
|
Employment Agreement with Mark A. Jeffries
The Corporation has entered into an employment
agreement with Mark A. Jeffries as its Executive Vice President and Chief Financial Officer, which was in effect during 2020. The employment
agreement includes customary non-competition and confidentiality covenants, establishes Mr. Jeffries’s duties and compensation,
and provides for his continued employment with the bank.
Base Salary. During 2020, Mr. Jeffries was
paid an annual salary of $242,138 under his agreement. Mr. Jeffries is also entitled to receive cash bonuses on an annual basis as determined
by the Board of Directors or the Compensation Committee.
Benefits. Mr. Jeffries is entitled to participate
in any and all retirement and employee benefit plans maintained by the bank on behalf of its employees, as well as fringe benefits normally
associated with his position with the bank or made available to all other employees. In addition, the bank has agreed to provide Mr. Jeffries
with the following benefits:
|
·
|
Five
weeks of paid vacation leave per year;
|
|
·
|
Reimbursement
for reasonable expenses incurred in the performance of his duties under the employment agreement;
|
|
·
|
Major
medical insurance at least equivalent to that which is generally provided to active full-time employees of the bank;
|
|
·
|
Participation
in incentive and bonus compensation plans; and
|
|
·
|
Participation
in all savings, pension and retirement plans (including the bank’s 401(k) savings plan).
|
Term. The initial term of Mr. Jeffries’s
employment agreement was three years from the original effective date of September 25, 2014, with such term being automatically extended
for an additional year on each anniversary of the agreement’s effective date, unless written notice of non-renewal of the term is
received by either party no later than sixty (60) days prior to renewal. Absent notification of non-renewal, the term remaining on his
employment agreement will never be less than 2 years.
Covenants. Mr. Jeffries’s employment
agreement also includes certain restrictive covenants that limit Mr. Jeffries’s ability to compete with the Corporation and to solicit,
or attempt to solicit, certain customers and any employee of the Corporation and its subsidiaries and affiliates for a period of twelve
months after any termination by Mr. Jeffries’s of his employment or to divulge certain confidential information concerning the Corporation
for any purpose other than as necessary in performance of his duties to the Corporation. Mr. Jeffries’s covenants not to compete
contained in the agreement may, in some instances, extend beyond twelve months if he is entitled to severance benefits for a period that
extends beyond twelve months.
Change in Control Benefits. Mr. Jeffries
is also entitled to certain benefits in the event of a “change in control” of the Corporation. A change in control means a
“change in control event” as defined in Treasury Regulation section 1.409A-3(i)(5), promulgated under section 409A of the
Code. If the bank terminates Mr. Jeffries’s employment other than for cause or disability or Mr. Jeffries terminates his employment
following a “termination event,” in either case within one year after a change in control, then Mr. Jeffries will be entitled
to receive a lump sum cash payment equal to 299% of his “base amount,” as that term is defined in Code section 280G.
For purposes of Mr. Jeffries’s employment
agreement, a “termination event” includes any of the following events:
|
·
|
If
Mr. Jeffries is assigned duties and/or responsibilities that are inconsistent with his position, duties, responsibilities, or status
at the time of the change in control or with his reporting responsibilities or titles with the bank in effect at such time;
|
|
·
|
If
Mr. Jeffries’s annual base salary is reduced below the amount in effect as of the effective date of the change in control;
|
|
·
|
If
Mr. Jeffries’s life insurance, major medical insurance, disability insurance, dental insurance, stock option plans, stock purchase
plans, deferred compensation plans, management retention plans, retirement plans, or similar plans or benefits being provided by the
Corporation as of the effective date of the change in control are reduced in their level, scope, or coverage, or any such insurance,
plans, or benefits are eliminated, unless such reduction or elimination applies proportionately to all salaried employees of the Corporation
who participated in such benefits prior to such change in control; or
|
|
·
|
If
Mr. Jeffries is transferred to a location outside of Harnett County, North Carolina, without his express written consent.
|
Employment Agreement with Lynn H. Johnson
The Corporation has entered into an employment
agreement with Lynn H. Johnson as its Executive Vice President and Chief Operating Officer, which was in effect during 2020. The employment
agreement includes customary non-competition and confidentiality covenants, establishes Ms. Johnson’s duties and compensation, and
provides for her continued employment with the bank.
Base Salary. During 2020, Ms. Johnson was
paid an annual salary of $285,000 under her agreement. Ms. Johnson is also entitled to receive cash bonuses on an annual basis as determined
by the Board of Directors or the Compensation Committee.
Benefits. Ms. Johnson is entitled to participate
in any and all retirement and employee benefit plans maintained by the bank on behalf of its employees, as well as fringe benefits normally
associated with her position with the bank or made available to all other employees. In addition, the bank has agreed to provide Ms. Johnson
with the following benefits:
|
·
|
Five
weeks of paid vacation leave per year;
|
|
·
|
Reimbursement
for reasonable expenses incurred in the performance of her duties under the employment agreement;
|
|
·
|
Major
medical insurance at least equivalent to that which is generally provided to active full-time employees of the bank;
|
|
·
|
Participation
in incentive and bonus compensation plans;
|
|
·
|
Participation
in all savings, pension and retirement plans (including the bank’s 401(k) savings plan); and
|
|
·
|
A monthly
car allowance of $750.00.
|
Term. The initial term of Ms. Johnson’s
employment agreement was three years from the original effective date of October 3, 2014, with such term being automatically extended
for an additional year on each anniversary of the agreement’s effective date, unless written notice of non-renewal of the term is
received by either party no later than sixty (60) days prior to renewal. Absent notification of non-renewal, the term remaining on her
employment agreement will never be less than 2 years.
Covenants. Ms. Johnson’s employment
agreement also includes certain restrictive covenants that limit Ms. Johnson’s ability to compete with the Corporation and to solicit,
or attempt to solicit, certain customers and any employee of the Corporation and its subsidiaries and affiliates for a period of up to
twelve months after termination by Ms. Johnson without cause or to divulge certain confidential information concerning the Corporation
for any purpose other than as necessary in performance of her duties to the Corporation. Ms. Johnson’s covenants not to compete
contained in the agreement may, in some instances, extend beyond twelve months if she is entitled to severance benefits for a period that
extends beyond twelve months.
Change in Control Benefits. Ms. Johnson
is also entitled to certain benefits in the event of a “change in control” of the Corporation. A change in control means a
change in control event as defined in Treasury Regulation § 1.409A-3(i)(5), promulgated under Section 409A of the Code. If the bank
terminates Ms. Johnson’s employment other than for cause or disability or Ms. Johnson terminates her employment following a “termination
event,” in either case within one year after a change in control, then Ms. Johnson will be entitled to receive a lump sum cash payment
equal to 299% of her “base amount,” as that term is defined in the Code.
For purposes of Ms. Johnson’s employment
agreement, a “termination event” includes any of the following events:
|
·
|
If
Ms. Johnson is assigned duties and/or responsibilities that are inconsistent with her position, duties, responsibilities, or status at
the time of the change in control or with her reporting responsibilities or titles with the bank in effect at such time;
|
|
·
|
If
Ms. Johnson’s annual base salary is reduced below the amount in effect as of the effective date of the change in control;
|
|
·
|
If
Ms. Johnson’s life insurance, major medical insurance, disability insurance, dental insurance, stock option plans, stock purchase
plans, deferred compensation plans, management retention plans, retirement plans, or similar plans or benefits being provided by the
Corporation as of the effective date of the change in control are reduced in their level, scope, or coverage, or any such insurance,
plans, or benefits are eliminated, unless such reduction or elimination applies proportionately to all salaried employees of the Corporation
who participated in such benefits prior to such change in control; or
|
|
·
|
If Ms. Johnson is transferred to a location outside
of Harnett County, North Carolina, without her express written consent.
|
Employment Agreement with D. Richard Tobin, Jr.
The Corporation has entered into an employment
agreement with D. Richard Tobin, Jr. as its Executive Vice President and Chief Credit Officer, which was in effect during 2020. The employment
agreement includes customary non-competition and confidentiality covenants, establishes Mr. Tobin’s
duties and compensation, and provides for his continued employment with the bank.
Base Salary. During 2020, Mr. Tobin was
paid an annual salary of $234,374 under his agreement. Mr. Tobin is also entitled to receive cash bonuses on an annual basis as determined
by the Board of Directors or the Compensation Committee.
Benefits. Mr. Tobin is entitled to participate
in any and all retirement and employee benefit plans maintained by the bank on behalf of its employees, as well as fringe benefits normally
associated with his position with the bank or made available to all other employees. In addition, the bank has agreed to provide Mr. Tobin
with the following benefits:
|
·
|
Five weeks of paid vacation leave per year;
|
|
·
|
Reimbursement for reasonable expenses incurred in the performance of his
duties under the employment agreement;
|
|
·
|
Major medical insurance at least equivalent to that which is generally provided
to active full-time employees of the bank;
|
|
·
|
Participation in incentive and bonus compensation plans;
|
|
·
|
Participation in all savings, pension and retirement plans (including the
bank’s 401(k) savings plan); and
|
|
·
|
A monthly car allowance of $750.00.
|
Term. The initial term of Mr. Tobin’s
employment agreement was two years from the original effective date of April 3, 2012. The current term of Mr. Tobin’s employment
agreement is one year; the term of his agreement automatically extends for an additional year each April 3 unless written notice of non-renewal
is received by either party no later than ninety (90) days prior to such renewal date.
Covenants. Mr. Tobin’s employment
agreement also includes certain restrictive covenants that limit Mr. Tobin’s ability to compete with the Corporation and to solicit,
or attempt to solicit, certain customers and any employee of the Corporation and its subsidiaries and affiliates for a period of twelve
months after any termination by Mr. Tobin or to divulge certain confidential information concerning the Corporation for any purpose other
than as necessary in performance of his duties to the Corporation. Mr. Tobin’s covenants not to compete contained in the agreement
may, in some instances, extend beyond twelve months if he is entitled to severance benefits for a period that extends beyond twelve months.
Change in Control Benefits. Mr. Tobin is
also entitled to certain benefits in the event of a “change in control” of the Corporation. A change in control means a change
in ownership or effective control as defined in section 409A of the Code. If the bank terminates Mr. Tobin’s employment other than
for cause or disability or Mr. Tobin terminates his employment following a “termination event,” in either case within one
year after a change in control, then Mr. Tobin will be entitled to receive a lump sum cash payment equal to 299% of his “base amount,”
as that term is defined in the Code.
For purposes of Mr. Tobin’s employment agreement,
a “termination event” includes any of the following events:
|
·
|
If Mr. Tobin is assigned duties and/or responsibilities that are inconsistent
with his position, duties, responsibilities, or status at the time of the change in control or with his reporting responsibilities or
titles with the bank in effect at such time;
|
|
·
|
If Mr. Tobin’s annual base salary is reduced below the amount in effect
as of the effective date of the change in control;
|
|
·
|
If Mr. Tobin’s life insurance, major medical insurance, disability
insurance, dental insurance, stock option plans, stock purchase plans, deferred compensation plans, management retention plans, retirement
plans, or similar plans or benefits being provided by the Corporation as of the effective date of the change in control are reduced in
their level, scope, or coverage, or any such insurance, plans, or benefits are eliminated, unless such reduction or elimination applies
proportionately to all salaried employees of the Corporation who participated in such benefits prior to such change in control; or
|
|
·
|
If Mr. Tobin is transferred to a location outside of Cumberland County, North
Carolina and Harnett County, North Carolina, without his express written consent.
|
Employment Agreement with W. Keith Betts
The Corporation has entered into an employment
agreement with W. Keith Betts as its Executive Vice President and Chief Banking Officer, which was in effect during 2020. The employment
agreement includes customary non-competition and confidentiality covenants, establishes Mr. Betts’s duties and compensation, and
provides for his continued employment with the bank.
Base Salary. During 2020, Mr. Betts was
paid an annual salary of $235,086 under his agreement. Mr. Betts is also entitled to receive cash bonuses on an annual basis as determined
by the Board of Directors or the Compensation Committee.
Benefits. Mr. Betts is entitled to participate
in any and all retirement and employee benefit plans maintained by the bank on behalf of its employees, as well as fringe benefits normally
associated with his position with the bank or made available to all other employees. In addition, the bank has agreed to provide Mr. Betts
with the following benefits:
|
·
|
Five weeks of paid vacation leave per year;
|
|
·
|
Reimbursement for reasonable expenses incurred in the performance of his
duties under the employment agreement;
|
|
·
|
A monthly car allowance of $895.83;
|
|
·
|
Major medical insurance at least equivalent to that which is generally provided
to active full-time employees of the bank;
|
|
·
|
Participation in incentive and bonus compensation plans; and
|
|
·
|
Participation in all savings, pension and retirement plans (including the
bank’s 401(k) savings plan).
|
Term. The initial term of Mr. Betts’s
employment agreement was three years from the original effective date of January 11, 2017, with such term being automatically extended
for an additional year on each anniversary of the agreement’s effective date, unless written notice of non-renewal of the term
is received by either party no later than sixty (60) days prior to renewal. Absent notification of non-renewal, the term remaining on
his employment agreement will never be less than 2 years.
Covenants. Mr. Betts’s employment
agreement also includes certain restrictive covenants that limit Mr. Betts’s ability to compete with the Corporation and to solicit,
or attempt to solicit, certain customers and any employee of the Corporation and its subsidiaries and affiliates for a period of twelve
months after termination by Mr. Betts without cause or to divulge certain confidential information concerning the Corporation for any
purpose other than as necessary in performance of his duties to the Corporation. Mr. Betts’s covenants not to compete contained
in the agreement may, in some instances, extend beyond twelve months if he is entitled to severance benefits for a period that extends
beyond twelve months.
Change in Control Benefits. Mr. Betts is
also entitled to certain benefits in the event of a “change in control” of the Corporation. A change in control means a change
in control event as defined in Treasury Regulation section 1.409A-3(i)(5), promulgated under Section 409A of the Code. If the bank terminates
Mr. Betts’s employment other than for cause or disability or Mr. Betts terminates his employment following a “termination
event,” in either case within one year after a change in control, then Mr. Betts will be entitled to receive a lump sum cash payment
equal to 299% of his “base amount,” as that term is defined in Code section 280G.
For purposes of Mr. Betts’s employment agreement,
a “termination event” includes any of the following events:
|
·
|
If Mr. Betts is assigned duties and/or responsibilities that are inconsistent
with his position, duties, responsibilities, or status at the time of the change in control or with his reporting responsibilities or
titles with the bank in effect at such time;
|
|
·
|
If Mr. Betts’s annual base salary is reduced below the amount in effect
as of the effective date of the change in control;
|
|
·
|
If Mr. Betts’s life insurance, major medical insurance, disability
insurance, dental insurance, stock option plans, stock purchase plans, deferred compensation plans, management retention plans, retirement
plans, or similar plans or benefits being provided by the Corporation as of the effective date of the change in control are reduced in
their level, scope, or coverage, or any such insurance, plans, or benefits are eliminated, unless such reduction or elimination applies
proportionately to all salaried employees of the Corporation who participated in such benefits prior to such change in control; or
|
|
·
|
If Mr. Betts is transferred to a location outside of New Hanover County,
North Carolina, without his express written consent.
|
Compensation Committee Report
The Compensation Committee has reviewed and discussed,
among other things, the Compensation Discussion and Analysis contained in this proxy statement with the Corporation’s management.
Based on such review and discussions, the Compensation Committee has recommended to the Board that the Compensation Discussion and Analysis
be included in this proxy statement.
Submitted by the Compensation Committee:
Gerald W. Hayes (chairman)
J. Gary Ciccone
Alicia S. Hawk
John W. McCauley
V. Parker Overton
SUMMARY COMPENSATION AND OTHER TABLES
Summary Compensation Table
The Summary Compensation Table below sets forth
the total compensation awarded to, earned by or paid to our named executive officers for 2018, 2019 and 2020.
Name and Principal
Position
|
|
|
|
|
Base
Salary
|
|
|
Bonus
(1)
|
|
|
Option
Awards (2)
|
|
|
Pension
&
NQDC (3)
|
|
|
Other
Compensation (4)
|
|
|
Total
Compensation
|
|
William L. Hedgepeth
II
|
|
|
2020
|
|
|
$
|
415,411
|
|
|
$
|
50,000
|
|
|
$
|
84,840
|
|
|
$
|
108,585
|
|
|
$
|
49,237
|
|
|
$
|
708,073
|
|
President and Chief Executive
Officer
|
|
|
2019
|
|
|
$
|
391,363
|
|
|
$
|
35,000
|
|
|
$
|
90,330
|
|
|
$
|
43,421
|
|
|
$
|
61,531
|
|
|
$
|
621,645
|
|
|
|
|
2018
|
|
|
$
|
370,541
|
|
|
$
|
25,000
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
66,828
|
|
|
$
|
462,369
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mark A. Jeffries
|
|
|
2020
|
|
|
$
|
242,138
|
|
|
$
|
27,500
|
|
|
$
|
42,420
|
|
|
$
|
-
|
|
|
$
|
15,516
|
|
|
$
|
327,574
|
|
EVP - Chief Financial Officer
|
|
|
2019
|
|
|
$
|
230,608
|
|
|
$
|
25,000
|
|
|
$
|
45,165
|
|
|
$
|
-
|
|
|
$
|
14,520
|
|
|
$
|
315,293
|
|
|
|
|
2018
|
|
|
$
|
221,738
|
|
|
$
|
12,000
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
7,474
|
|
|
$
|
241,212
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lynn H. Johnson
|
|
|
2020
|
|
|
$
|
285,000
|
|
|
$
|
37,500
|
|
|
$
|
56,560
|
|
|
$
|
74,060
|
|
|
$
|
22,576
|
|
|
$
|
475,696
|
|
EVP - Chief Operating Officer
|
|
|
2019
|
|
|
$
|
229,369
|
|
|
$
|
30,000
|
|
|
$
|
45,165
|
|
|
$
|
20,964
|
|
|
$
|
20,677
|
|
|
$
|
346,175
|
|
|
|
|
2018
|
|
|
$
|
220,547
|
|
|
$
|
25,000
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
22,362
|
|
|
$
|
267,909
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
W. Keith Betts
|
|
|
2020
|
|
|
$
|
235,086
|
|
|
$
|
25,000
|
|
|
$
|
28,280
|
|
|
$
|
-
|
|
|
$
|
30,442
|
|
|
$
|
318,808
|
|
EVP - Chief Banking Officer
|
|
|
2019
|
|
|
$
|
227,136
|
|
|
$
|
25,000
|
|
|
$
|
45,165
|
|
|
$
|
-
|
|
|
$
|
32,918
|
|
|
$
|
330,219
|
|
|
|
|
2018
|
|
|
$
|
218,400
|
|
|
$
|
12,000
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
28,539
|
|
|
$
|
258,939
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
D. Richard Tobin, Jr.
|
|
|
2020
|
|
|
$
|
234,374
|
|
|
$
|
25,000
|
|
|
$
|
28,280
|
|
|
$
|
-
|
|
|
$
|
24,720
|
|
|
$
|
312,374
|
|
EVP - Chief Credit Officer
|
|
|
2019
|
|
|
$
|
225,360
|
|
|
$
|
25,000
|
|
|
$
|
45,165
|
|
|
$
|
-
|
|
|
$
|
24,184
|
|
|
$
|
319,709
|
|
|
|
|
2018
|
|
|
$
|
216,693
|
|
|
$
|
12,000
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
22,861
|
|
|
$
|
251,554
|
|
|
(1)
|
Reflects discretionary cash bonus awards made by the Compensation Committee.
|
|
(2)
|
Calculated in accordance with FASB ASC Topic 718 and represents the fair value of stock options awarded based on the market price
of the Corporation’s common stock on the date of grant of such award; the values do not represent actual cash compensation earned.
The assumptions used in estimating the fair value of stock options are set forth in Note P to the Corporation’s audited consolidated
financial statements for the year ended December 31, 2020.
|
|
(3)
|
The amounts in this column reflect the annual change in the total actuarial net present value of the NEOs’ accrued benefits
under the executive’s individual SERP agreement. Mr. Hedgepeth and Ms. Johnson are the only NEOs that are parties to SERP
agreements with our subsidiary bank.
|
|
(4)
|
Details on the amounts reported for “All Other Compensation” in 2020 are set forth in the following supplementary table:
|
Details on All Other
Compensation Reported in the Summary Compensation Table for 2020
Named Executive
Officer
|
|
Auto
Provision
|
|
|
Country
Club
Membership and
Dues
|
|
|
Employer
401(k) Match
|
|
|
Life
Insurance
|
|
|
Family
Health
Insurance
|
|
|
Total
Other Compensation
|
|
William L. Hedgepeth
II; President, CEO
|
|
$
|
12,000
|
|
|
$
|
4,968
|
|
|
$
|
12,462
|
|
|
$
|
102
|
|
|
$
|
19,705
|
|
|
$
|
49,237
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mark A. Jeffries; Chief Financial
Officer
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
15,414
|
|
|
$
|
102
|
|
|
|
|
|
|
$
|
15,516
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lynn H. Johnson; Chief Operating
Officer
|
|
$
|
9,000
|
|
|
$
|
-
|
|
|
$
|
13,474
|
|
|
$
|
102
|
|
|
|
|
|
|
$
|
22,576
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
W. Keith Betts; Chief Banking
Officer
|
|
$
|
10,750
|
|
|
$
|
4,260
|
|
|
$
|
14,477
|
|
|
$
|
955
|
|
|
|
|
|
|
$
|
30,442
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
D. Richard
Tobin, Jr.; Chief Credit Officer
|
|
$
|
9,000
|
|
|
$
|
-
|
|
|
$
|
15,618
|
|
|
$
|
102
|
|
|
|
|
|
|
$
|
24,720
|
|
Grants of Plan-Based Awards. The Grants
of Plan-Based Awards Table below sets forth the non-equity incentive plan awards and equity awards granted in 2020 to our NEOs. The table
should be read in conjunction with the Summary Compensation Table provided above. The non-equity incentive plan awards were made under
the Corporation’s annual cash incentive plan discussed previously. The stock option awards were granted pursuant to the Corporation’s
2018 Omnibus Stock Incentive Plan.
Grants
of Plan-Based Awards
|
|
|
|
Estimated
future payouts under non-equity
|
|
|
All
Other Option
|
|
|
|
|
|
|
|
|
|
|
|
incentive
plan awards (1)
|
|
|
Awards:
|
|
|
Exercise
or Base
|
|
|
Grant Date Fair Value
|
|
|
|
|
|
Threshold
|
|
|
|
|
|
Stretch
|
|
|
Number
of Securities
|
|
|
Price
of
|
|
|
of
Stock and
|
|
Name
|
|
Grant Date
|
|
(Minimum)
|
|
|
Target
|
|
|
(Maximum)
|
|
|
Underlying
Options (2)
|
|
|
Option Awards ($/Sh)
|
|
|
Option Awards (3)
|
|
William L. Hedgepeth
II
|
|
1/15/2020
|
|
$
|
0.00
|
|
|
$
|
62,312
|
|
|
$
|
124,623
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1/21/2020
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
15,000
|
|
|
$
|
11.84
|
|
|
$
|
84,840
|
|
D. Richard Tobin, Jr.
|
|
1/15/2020
|
|
$
|
0.00
|
|
|
$
|
35,156
|
|
|
$
|
70,312
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1/21/2020
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
5,000
|
|
|
$
|
11.84
|
|
|
$
|
28,280
|
|
Lynn H. Johnson
|
|
1/15/2020
|
|
$
|
0.00
|
|
|
$
|
42,750
|
|
|
$
|
85,500
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1/21/2020
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
10,000
|
|
|
$
|
11.84
|
|
|
$
|
56,560
|
|
W. Keith Betts
|
|
1/15/2020
|
|
$
|
0.00
|
|
|
$
|
35,263
|
|
|
$
|
70,526
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1/21/2020
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
5,000
|
|
|
$
|
11.84
|
|
|
$
|
28,280
|
|
Mark A. Jeffries
|
|
1/15/2020
|
|
$
|
0.00
|
|
|
$
|
36,321
|
|
|
$
|
72,641
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1/21/2020
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
7,500
|
|
|
$
|
11.84
|
|
|
$
|
42,420
|
|
|
(1)
|
These amounts represent potential payouts under the annual cash incentive plan based on a maximum of 30% of base salary for each executive
participant in the plan. This plan was authorized and approved by the Compensation Committee on January 15, 2020. Each award had an annual
performance period that has now concluded, and no payout was made by the Compensation Committee under the annual cash incentive plan.
Determination of payout is based on percentage of pre-tax net income earned and achievement of individually weighted, key performance
measures as described in the Compensation Discussion and Analysis section above beginning on page 20.
|
|
(2)
|
All of the option grants are subject to a five-year vesting schedule, with, subject to the continued employment of the option recipient,
20% of the options becoming exercisable on each anniversary of the date of grant.
|
|
(3)
|
These amounts represent the grant date fair value of the option grants based on the Black-Scholes value on the grant date of $5.66
per share.
|
Outstanding Equity Awards. The following
table sets forth certain information regarding vested and unvested stock options outstanding as of December 31, 2020. All of the Corporation’s
outstanding stock options have been granted at 100% of fair market value on the date of grant.
Outstanding
Equity Awards at Fiscal-Year End
|
|
Option Awards (1)
|
Named Executive Officer
|
|
Grant Date
|
|
Number of Securities Underlying Unexercised Options (#) Exercisable
|
|
|
Number of Securities Underlying Unexercised Options (#) Unexercisable
|
|
|
Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#)
|
|
|
Options Exercise Price
|
|
|
Option Expiration Date
|
William L. Hedgepeth II
|
|
1/21/2020
|
|
|
-
|
|
|
|
15,000
|
|
|
|
-
|
|
|
$
|
11.84
|
|
|
1/21/2030
|
|
|
1/22/2019
|
|
|
3,000
|
|
|
|
12,000
|
|
|
|
-
|
|
|
$
|
11.84
|
|
|
1/22/2029
|
|
|
9/6/2017
|
|
|
4,200
|
|
|
|
2,800
|
|
|
|
-
|
|
|
$
|
11.27
|
|
|
9/6/2027
|
|
|
1/24/2017
|
|
|
3,900
|
|
|
|
2,600
|
|
|
|
-
|
|
|
$
|
10.15
|
|
|
1/24/2027
|
|
|
2/23/2016
|
|
|
12,000
|
|
|
|
3,000
|
|
|
|
-
|
|
|
$
|
8.04
|
|
|
2/23/2026
|
|
|
2/11/2015
|
|
|
15,000
|
|
|
|
-
|
|
|
|
-
|
|
|
$
|
6.93
|
|
|
2/11/2025
|
|
|
2/22/2011
|
|
|
5,000
|
|
|
|
-
|
|
|
|
-
|
|
|
$
|
5.03
|
|
|
2/22/2021
|
D. Richard Tobin, Jr.
|
|
1/21/2020
|
|
|
-
|
|
|
|
5,000
|
|
|
|
-
|
|
|
$
|
11.84
|
|
|
1/21/2030
|
|
|
1/22/2019
|
|
|
1,500
|
|
|
|
6,000
|
|
|
|
-
|
|
|
$
|
11.84
|
|
|
1/22/2029
|
|
|
1/24/2017
|
|
|
1,620
|
|
|
|
1,080
|
|
|
|
-
|
|
|
$
|
10.15
|
|
|
1/24/2027
|
Lynn H. Johnson
|
|
1/21/2020
|
|
|
-
|
|
|
|
10,000
|
|
|
|
-
|
|
|
$
|
11.84
|
|
|
1/21/2030
|
|
|
1/22/2019
|
|
|
1,500
|
|
|
|
6,000
|
|
|
|
-
|
|
|
$
|
11.84
|
|
|
1/22/2029
|
|
|
1/24/2017
|
|
|
840
|
|
|
|
1,680
|
|
|
|
-
|
|
|
$
|
10.15
|
|
|
1/24/2027
|
|
|
2/23/2016
|
|
|
2,000
|
|
|
|
2,000
|
|
|
|
-
|
|
|
$
|
8.04
|
|
|
2/23/2026
|
|
|
2/11/2015
|
|
|
1,500
|
|
|
|
-
|
|
|
|
-
|
|
|
$
|
6.93
|
|
|
2/11/2025
|
W. Keith Betts
|
|
1/21/2020
|
|
|
-
|
|
|
|
5,000
|
|
|
|
-
|
|
|
$
|
11.84
|
|
|
1/21/2030
|
|
|
1/22/2019
|
|
|
1,500
|
|
|
|
6,000
|
|
|
|
-
|
|
|
$
|
11.84
|
|
|
1/22/2029
|
|
|
1/24/2017
|
|
|
1,020
|
|
|
|
680
|
|
|
|
-
|
|
|
$
|
10.15
|
|
|
1/24/2027
|
|
|
4/14/2016
|
|
|
2,000
|
|
|
|
500
|
|
|
|
-
|
|
|
$
|
8.12
|
|
|
4/14/2026
|
Mark A. Jeffries
|
|
1/21/2020
|
|
|
-
|
|
|
|
7,500
|
|
|
|
-
|
|
|
$
|
11.84
|
|
|
1/21/2030
|
|
|
1/22/2019
|
|
|
1,500
|
|
|
|
6,000
|
|
|
|
-
|
|
|
$
|
11.84
|
|
|
1/22/2029
|
|
|
1/24/2017
|
|
|
2,520
|
|
|
|
1,680
|
|
|
|
-
|
|
|
$
|
10.15
|
|
|
1/24/2027
|
|
(1)
|
Options subject to a five-year vesting schedule whereby 20% of the shares subject to the option grant
become exercisable on each anniversary of the grant date.
|
Option Exercises and Stock Vested. Set forth
below is a table detailing the number of shares of Corporation common stock for which options were exercised by a NEO during the fiscal
year ended December 31, 2020 and the aggregate dollar value realized upon the exercise of such option, measured by the difference between
the exercise price of the option and the market value of the stock on the date of exercise.
Option
Exercises and Stock Vested
|
|
Stock Options Awards
|
Named Executive Officer
|
|
Date of Exercise
|
|
Shares Acquired on Exercise
|
|
|
Value Realized on Exercise ($)
|
|
William L. Hedgepeth II
|
|
N/A
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Mark A. Jeffries
|
|
N/A
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
D. Richard Tobin
|
|
2/7/2020
|
|
|
1,000
|
|
|
$
|
5,320
|
|
|
|
|
|
|
|
|
|
|
|
|
Lynn H. Johnson
|
|
N/A
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
W. Keith Betts
|
|
N/A
|
|
|
-
|
|
|
|
-
|
|
As of December 31, 2020, there were no stock awards outstanding to
our named executive officers.
2019 Supplemental Executive Retirement Plan
Agreements. The Corporation’s subsidiary bank, Select Bank & Trust Company, has entered into supplemental executive retirement
plan agreements (“SERPs”) with Mr. Hedgepeth and Ms. Johnson. Subject to its terms and conditions, each SERP is an unfunded
promise intended to provide the officer with certain supplemental retirement benefits upon retirement, or if earlier, upon the officer’s
separation from service for certain qualifying terminations of the officer’s employment. The amount and timing of payment of the
supplemental retirement benefits vary based on a number of factors, including, among others, the age of the officer, the reason for any
separation from service, and whether the officer has met the vesting requirements set forth in the agreement at the time of any payment
triggering event. Set forth below is a table summarizing the benefit amount and timing of such payment that would be due to the officer
upon certain events resulting in a separation from service of the officer from the employ of the bank:
Triggering Event
|
|
Benefit Amount(1)
|
|
Timing of Benefit Payments(2)
|
|
Acceleration of Benefit Vesting
|
|
|
|
|
|
|
|
Termination of employment on or after reaching normal retirement age of 67
|
|
Vested annual benefit amount on date of termination of employment
|
|
For 15 years, with first payment occurring on first day of year following termination of employment
|
|
n/a
|
|
|
|
|
|
|
|
Termination of employment by the officer without good reason (as defined in the SERP) before reaching normal retirement age of 67
|
|
Vested annual benefit amount on date of termination of employment
|
|
For 15 years, with first payment occurring on first day of year following the year individual reaches normal retirement age of 67
|
|
No
|
|
|
|
|
|
|
|
Termination of employment by the bank without cause (as defined in the SERP) or by the officer with good reason before reaching normal retirement age of 67
|
|
Projected vested annual benefit amount existing at age 67
|
|
For 15 years, with first payment occurring on first day of year following the year individual reaches normal retirement age of 67
|
|
No
|
|
|
|
|
|
|
|
Officer dies prior to terminating employment
|
|
Cash amount equal to the present value of projected vested annual benefit amount on date of death
|
|
Single lump-sum payment within 60 days of the date of officer’s death
|
|
Yes
|
|
|
|
|
|
|
|
Officer dies after termination of employment
|
|
Cash amount equal to the present value of vested annual benefit amount remaining at the officer’s death
|
|
Single lump-sum payment within 60 days of the date of officer’s death
|
|
n/a
|
|
|
|
|
|
|
|
Termination of employment due to disability before reaching normal retirement age of 67
|
|
Cash amount equal to the present value of the projected vested annual benefit amount as of date of termination of employment
|
|
Single lump-sum payment within 60 days of termination of employment
|
|
Yes
|
|
|
|
|
|
|
|
Termination of employment without cause or by officer for good reason within 12 months of a change in control of the bank
|
|
Cash amount equal to the present value of projected vested annual benefit amount as of date of termination of employment
|
|
Single lump-sum payment within 30 days of termination of employment
|
|
Yes
|
|
(1)
|
The benefit amount is subject to reduction in the event that the applicable payments would constitute
“parachute payments” (within the meaning of Section 280G of the Code). The benefit amount would be reduced so that no payments
to be made or benefit to be provided to the officer would be subject to the excise tax imposed under Code Section 4999.
|
|
(2)
|
Payment may be delayed as required by Code Section 409A if officer is a “specified employee”
(as defined in Section 409A).
|
Additionally, if an officer is already receiving
payments under the SERP at the time a change in control (as defined in the agreement) of the bank occurs, the benefit payments otherwise
payable would generally be accelerated to a single lump-sum payment, with such lump-sum payment being equal to the present value of the
benefit the officer is receiving at the time the change in control occurs, applying a five percent (5%) discount rate. Each SERP provides
that the applicable officer would not be entitled to any benefit under the SERP if the officer’s separation from service is due
to a termination with cause (as defined in the agreement).
The annual benefit amount to which an officer
is entitled under the SERP is calculated based on a formula (as more particularly set forth in the SERP), which is generally
designed for the officer to receive for a period of 15 years an annual benefit equal to a percentage of the officer’s average
salary over the officer’s last sixty months of employment prior to the date that the officer either terminates employment or
reaches normal retirement age (or, if later, the date that the officer terminates employment after reaching normal retirement age),
subject to certain offsets and assumptions. We refer to this average salary over the last sixty months of employment as the
“final average pay.” To estimate the final average pay, we assume a 3% salary inflator over the remaining period prior
to the date the officer reaches the SERP’s retirement age of 67. The percentage of the final average pay to be received by the
officer is generally based off of how many years of an assumed full 40-year working career the officer was employed at the bank.
Once the final average pay is determined, such amount is multiplied by the applicable percentage, and the resultant product is then
reduced by a “qualified retirement plan offset” and a “social security offset” to arrive at the annual
benefit amount under the SERP. At December 31, 2020, the SERPs had following projected annual benefit amounts for each officer: Mr.
Hedgepeth - $118,692 and Ms. Johnson - $94,002.
Subject to earlier acceleration as shown in the
table above, the officer becomes vested, assuming continued employment, in the benefit amount over a five-year period, with the officer
becoming 20% vested in the benefit upon reaching the age of 63. The remaining 80% vests on each subsequent anniversary thereafter at a
rate of 20% per year, such that the officer would be fully vested at the normal retirement age of 67.
The table below shows, as of December 31, 2019,
the present value of accumulated benefits payable to certain of our named executive officers, including the number of years of service
credited to each officer, under the named executive officer’s individual SERP. Such amounts were determined by using the interest
rate assumptions consistent with those used in the Corporation’s consolidated financial statements. Mr. Hedgepeth, our President
and Chief Executive Officer, and Ms. Johnson, our Chief Operating Officer, are the only named executive officers with a SERP currently
in place.
Pension
Benefits
Name
|
|
Plan Name
|
|
Number of Years Credited Service(1)(2)
|
|
|
Present Value of Accumulated Benefit(3)
|
|
|
Payments During Last Fiscal Year
|
|
William L. Hedgepeth II
|
|
2019 SERP
|
|
|
17
|
|
|
$
|
152,006
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lynn H. Johnson
|
|
2019 SERP
|
|
|
18
|
|
|
$
|
95,023
|
|
|
$
|
—
|
|
|
(1)
|
Credited years of service is based on dates of hire for Mr. Hedgepeth (3/01/2004) and Ms. Johnson (6/02/2003) with Select Bank &
Trust Company. Years of service is relative for determination of the percentage of final average pay that will be the annual benefit amount
for the officer over a 15-year period. The percentage is determined by taking the years of credited service and dividing it by 40 years,
which is the assumed length of a full working career under the SERP. At December 31, 2020, the annual benefit amount was determined by
taking the officer’s final average pay (as defined in the SERP) and multiplying it by, in the case of Mr. Hedgepeth, 42.1%, and
in the case of Ms. Johnson, 44.0%. The annual benefit amount is re-estimated each year based on change in underlying factual assumptions.
|
|
(2)
|
The number of years credited service has no impact on the officer’s vesting schedule.
|
|
(3)
|
In calculating the present value of the accumulated benefit for each officer, a discount rate of 4.25% was used with the assumptions
that (i) payment would commence at retirement age of 67, (ii) with the benefit being paid in 15 equal annual payments, and (iii) with
the first payment commencing on the first day of the month following the month in which the officer’s reaches the SERP’s retirement
age of 67.
|
Potential Payments Upon Termination or Change in Control
The following discussion presents the potential
payments for each named executive officer upon a termination of employment or change in control. Pursuant to applicable SEC rules, the
analysis contained in this discussion does not consider or include payments made to a named executive officer with respect to contracts,
agreements, plans or arrangements to the extent they do not discriminate in scope, terms or operation in favor of named executive officers
of the Corporation and that are available generally to all salaried employees. The actual amounts that would be paid upon a named executive
officer’s termination of employment can only be determined at the time of such executive officer’s termination. Due to the
number of factors that affect the nature and amount of any compensation or benefits provided upon the termination events, any actual amounts
paid or distributed may be higher or lower than reported below. Among other factors that could affect these amounts are the timing during
the year of any such event and our stock price.
In accordance with applicable SEC rules, the following
discussion assumes that: (i) the termination event in question occurred on December 31, 2020; and (ii) with respect to calculations based
on the Corporation’s stock price, the applicable price is $9.47, which was the reported closing price on NASDAQ of one share of
the Corporation’s common stock on December 31, 2020.
The estimated payments and benefits that may be
due to a named executive officer vary based on whether a termination of employment occurs independently of or in connection with a change
in control of the Corporation. Triggered payments also vary depending on whether the employment termination is with or without “cause”
and voluntary or involuntary. In general, other than salary and other compensation payable through the date of termination, our named
executive officers will not generally be due under the employment agreements any additional special benefits if the executive experiences
an involuntary termination for cause or the executive voluntarily terminates the executive’s own employment. Therefore, the discussion
below will primarily discuss scenarios where the Corporation terminates a named executive officer’s employment without “cause”
or the executive resigns for “good reason,” both inside and outside the context of a change in control of the Corporation.
Non-Change in Control Employment Terminations.
The employment agreements between the Corporation and all of the named executive officers require the Corporation to make certain severance
payments and provide severance benefits to the applicable executive upon the termination of the executive’s employment by the Corporation
without “cause.”
For purposes of the employment agreements, “cause”
is generally defined as:
|
·
|
the
executive’s material breach of the employment agreement or any other agreement with the bank;
|
|
·
|
the
executive’s willful misconduct or gross negligence in connection with the performance of the executive’s duties or the Corporation’s
business;
|
|
·
|
the
violation of any state or federal law or of any rule, regulation or order by any governmental agency having jurisdiction over the bank
or its subsidiaries;
|
|
·
|
the
commission of an act of fraud, willful theft, embezzlement or similar act of proven dishonesty against the Corporation, regardless of
conviction or criminal prosecution;
|
|
·
|
the
conviction for a felony or criminal offense involving dishonesty or breach of trust or any offense covered by Section 19 of Federal Deposit
Insurance Act;
|
|
·
|
if
the executive is removed, found to be unacceptable or prohibited from participating in the conduct of the bank’s affairs by any
banking regulatory agency; or
|
|
·
|
the
occurrence of any event that results in the executive being excluded from coverage, or having coverage limited as to executive compared
to other covered employees, under the bank’s “blanket bond” or other fidelity bond or insurance policy covering its
directors, officers, or employees.
|
The amount payable to each of the executives under
the applicable employment agreement varies based on the length of the term remaining on the executive’s employment agreement at
the time of the without-cause termination by the Corporation. Additional detail regarding the amounts payable upon a termination without
cause is set forth in the “Compensation and Benefits Payable Upon Termination Events” table and related footnotes provided
below.
Change in Control Employment
Terminations. As discussed above, the employment agreements between the Corporation and all of the named executive officers
require the Corporation to make certain severance payments and provide severance benefits to the applicable executive upon the
termination of the executive’s employment with the Corporation by the executive following a “termination event” or
“adverse change” (which are commonly referred to as a “good reason” termination) or by the Corporation
without “cause,” in either case, if such termination occurs within twelve months following a change in control of the
Corporation. Quantification of such payment amounts that would be payable to the applicable executive following a change in control
are set forth in the “Compensation and Benefits Payable Upon Termination Events” table provided below.
Additionally, all option awards previously granted
under the 2010 Omnibus Stock Ownership and Long Term Incentive Plan automatically become fully vested upon the death or disability of
the NEO, or upon the occurrence of a “change of control” (as defined in the 2010 Plan). Thereafter, such options are fully
exercisable until the option terminates or expires in accordance with the terms and conditions of the applicable grant agreement and the
2010 Plan. With respect to stock options granted under the Corporation’s 2018 Plan, as of December 31, 2020, all option awards granted
under such plan to our named executive officers provide that the option will become fully vested if a “corporate transaction”
(as defined in the 2018 Plan) occurs and the officer’s employment is terminated for a reason other than cause on the date of or
within 12 months of the corporate transaction. A corporate transaction would include a merger in which the Corporation was not the surviving
entity, a sale of all or substantially all of the Corporation’s assets, or an acquisition by any person or related group of persons
of beneficial ownership of securities possessing more than fifty percent (50%) of the total combined voting power of the Corporation’s
outstanding securities.
The SERPs to which each of Mr. Hedgepeth and Ms.
Johnson are parties also have provisions that would accelerate the vesting of the officer in the benefit payable under the SERP under
certain scenarios, which acceleration is dependent on the reason for an employment termination and/or whether such termination occurred
within 12 months of a change in control of the Corporation. Additional narrative description of these scenarios occurs above under the
heading “2019 Supplemental Executive Retirement Plan Agreements” and the accompanying tables.
The foregoing payments and benefits associated
with a change in control may be subject to reduction under the named executive officers’ employment agreements or, as applicable,
the officer’s SERP in connection with certain tax matters. With the exception of Mr. Tobin’s agreement, all of the named executive
officers’ employment agreements provide that it is the intent of parties to the applicable agreement for such payments to be deductible
to the employer for federal income tax purposes and not result in excise taxes. Therefore, with respect to all NEOs other than Mr. Tobin,
any payments under the agreements that are deemed “parachute payments” as defined in section 280G(b)(2) of the Code shall
be reduced to the minimum extent necessary that will result in no portion of the benefit payments being subject to the tax imposed by
section 4999 of the Code or cause a disallowance of the compensation deduction for the Corporation. The payment amounts included in the
table below are the estimated payment amounts calculated at December 31, 2020, and after application of any required reduction in such
amounts due to the application of the foregoing Code section 280G “cutback.” The actual cutback, if any, in payments due to
a NEO in an actual change in control scenario will vary based on numerous factors at the time of consummation of any change in control.
For purposes of section 409A of the Code, all of the named executive officers’ employment agreements are structured to be in compliance
with payment timing and other relevant requirements.
Compensation and Benefits Payable Upon
Termination Events
|
|
Involuntary without
Cause(1)(2)
|
|
|
Voluntary or
Involuntary For
Cause
|
|
|
Change in
Control (3)
|
|
|
Death
|
|
|
Disability(4)
|
|
William L. Hedgepeth II
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Base Salary
|
|
$
|
830,821
|
|
|
$
|
-
|
|
|
$
|
1,194,070
|
|
|
$
|
-
|
|
|
$
|
710,821
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrued Cash Bonus
|
|
$
|
32,500
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Medical health benefits (5)
|
|
$
|
57,946
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
57,946
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intrinsic value of unvested stock options (6)
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
4,290
|
|
|
$
|
4,290
|
|
|
$
|
4,290
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental Executive Retirement Plan (7)(8)(9)
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
255,773
|
|
|
$
|
833,854
|
|
|
$
|
833,854
|
|
Total Benefit
|
|
$
|
921,267
|
|
|
$
|
-
|
|
|
$
|
1,454,133
|
|
|
$
|
838,144
|
|
|
$
|
1,606,911
|
|
D. Richard Tobin, Jr.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Base Salary
|
|
$
|
58,594
|
|
|
$
|
-
|
|
|
$
|
621,304
|
|
|
$
|
-
|
|
|
$
|
58,594
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrued Cash Bonus
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Medical health benefits (5)
|
|
$
|
2,317
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
2,317
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intrinsic value of unvested stock options (6)
|
|
$
|
-
|
|
|
|
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Total Benefit
|
|
$
|
60,911
|
|
|
$
|
-
|
|
|
$
|
621,304
|
|
|
$
|
-
|
|
|
$
|
60,911
|
|
Lynn H. Johnson
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Base Salary
|
|
$
|
783,750
|
|
|
$
|
-
|
|
|
$
|
626,709
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrued Cash Bonus
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Medical health benefits
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intrinsic value of unvested stock options (6)
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
2,860
|
|
|
$
|
2,860
|
|
|
$
|
2,860
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental Executive Retirement Plan (7)(8)(9)
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
108,988
|
|
|
$
|
628,950
|
|
|
$
|
628,950
|
|
Total Benefit
|
|
$
|
783,750
|
|
|
$
|
-
|
|
|
$
|
738,557
|
|
|
$
|
631,810
|
|
|
$
|
631,810
|
|
Compensation and Benefits Payable Upon
Termination Events
|
|
Involuntary without
Cause(1)(2)
|
|
|
Voluntary or
Involuntary For
Cause
|
|
|
Change in
Control (3)
|
|
|
Death
|
|
|
Disability(4)
|
|
Mark A. Jeffries
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Base Salary
|
|
$
|
665,881
|
|
|
$
|
-
|
|
|
$
|
591,464
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrued Cash Bonus
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Medical health benefits
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intrinsic value of unvested stock options (6)
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Total Benefit
|
|
$
|
665,881
|
|
|
$
|
-
|
|
|
$
|
591,464
|
|
|
$
|
-
|
|
|
$
|
-
|
|
W. Keith Betts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Base Salary
|
|
$
|
470,172
|
|
|
$
|
-
|
|
|
$
|
624,185
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrued Cash Bonus
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Medical health benefits
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intrinsic value of unvested stock options (6)
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
675
|
|
|
$
|
675
|
|
|
$
|
675
|
|
Total Benefit
|
|
$
|
470,172
|
|
|
$
|
-
|
|
|
$
|
624,860
|
|
|
$
|
675
|
|
|
$
|
675
|
|
|
(1)
|
Assumes 12/31/2020 termination. Amount payable under each agreement varies based on the term remaining on the applicable employment
agreement and, accordingly, does not reflect the amount of severance benefit that may be payable had a termination occurred on a different
date. Generally, executive is entitled to a severance benefit equal to the remaining salary payable over the course of the remaining term
of the agreement, as if such early termination had not occurred. With the exception of Mr. Hedgepeth, who will receive such amount in
a lump sum payment within five business days of termination, the amount payable will be paid in installments in accordance with the bank’s
normal payroll practices. For purposes of estimating the calculations as of a 12/31 involuntary termination, we have assumed that the
applicable NEO has the following term remaining on his or her employment agreement as of such date: Mr. Hedgepeth - 2.00 years; Mr. Tobin
- 0.25 years; Ms. Johnson - 2.75 years; Mr. Jeffries - 2.75 years; and Mr. Betts - 2.00 years. We have also assumed any required advance
notice provision has been complied with by the party terminating such agreement. The base salary used for the calculations is based on
the salary in effect during 2020 for the applicable NEO.
|
|
(2)
|
Mr. Hedgepeth is also entitled to the total benefit set forth in this column if he terminates his own employment with “good
reason” (which is commonly equated to an involuntary separation from service). He will be entitled to terminate his own employment
for “good reason” if: (i) there is any material adverse change or diminution in his compensation, office, title, duties, powers,
authority, responsibilities, or reporting structure without his consent, (ii) there is any material adverse change or diminution in his
compensation or benefits, (iii) he is required to relocate to a place of work more than twenty (20) miles from Fayetteville, North Carolina
or Dunn, North Carolina without his consent, or (iv) the Corporation materially breaches the employment agreement and fails to cure such
breach.
|
|
(3)
|
Under the officer’s employment agreement, cash compensation is payable in a lump sum amount on the first day of the seventh
month after the qualifying employment termination following the change in control (absent the prior death of the NEO).
|
|
(4)
|
Assumes 12/31/2020 termination. The amount payable under Mr. Hedgepeth’s and Mr. Tobin’s employment agreements upon a
disability termination varies based on the term remaining on the applicable employment agreement and, accordingly, does not reflect the
amount of benefit that may be payable had a termination due to disability occurred on a different date. With respect to the term remaining
on the employment agreement, the same assumptions have been used as are referenced in footnote (1) to this table. As referenced above,
the table does not reflect amounts that may be payable to our named executive officers under any benefit plan or other arrangement to
the extent such plan or arrangement does not discriminate in scope, terms, or operation in favor of named executive officers of the Corporation
and that are available generally to all salaried employees.
|
|
(5)
|
Reflects value of the continuation of certain medical insurance benefits upon certain qualifying terminations.
|
|
(6)
|
With respect to option awards under the 2010 Plan, reflects accelerated vesting of outstanding stock options upon a “change
in control” (as defined in the 2010 Plan), death, or disability pursuant to the terms of the underlying option grant agreements.
With respect to option awards under the 2018 plan, assumes that the officer’s employment has been terminated other than for cause
at or within 12 months of a “corporate transaction” that triggers accelerated vesting. The intrinsic value of the applicable
option award is based on a share price of $9.47, the closing price of the Corporation’s common stock as of December 31, 2020. The
amounts presented for each named executive officer equal the total number of unvested awards that accelerate times the value of each award.
Stock option value is $9.47 minus the specified exercise price of the option. With respect to any options which have an exercise price
that is greater than the share price of $9.47, the expectation is that the officer would not exercise such options and the intrinsic value
for such options is therefore $0.00.
|
|
(7)
|
Since the officer is not currently vested in any of the benefit payable under the SERP, no cash payment would be due upon the bank’s
termination of the officer’s employment without cause or the officer’s resignation for good reason (as such terms are defined
in the SERP).
|
|
(8)
|
With respect to Mr. Hedgepeth and Ms. Johnson’s SERPs, the cash amount assumes a termination of employment due to disability
or death on 12/31/2020. The officer will become 100% vested in the projected SERP benefit upon a disability termination or termination
of employment due to death. The SERP benefit amount will be paid, in the case of death, to the officer’s beneficiary in a single
lump sum within 60 days of death and, in the case of disability termination, to the officer within sixty (60) days after the date on which
termination of employment due to disability occurs (provided that if the officer is a “specified employee” (as defined in
Code Section 409A), the bank will pay the benefit on the first day of the seventh month after the month in which the disability termination
occurs). Additionally, in calculating the final average pay and corresponding projected vested annual benefit amount for a disability
termination or termination due to death, the base salary used is the officer’s last base salary paid by the bank and increased at
a rate of three percent (3%) per year for each year after the officer terminates employment through the officer’s normal retirement
date at age 67. Consistent with the terms of the SERP, in calculating the lump sum amount, the Corporation applies a five percent (5%)
discount rate.
|
|
(9)
|
Pursuant to the SERP, the officer will become 100% vested upon a change in control and the benefit payment is to be made in a lump
sum within 30 days of the change in control. Additionally, in calculating the final average pay and corresponding projected vested annual
benefit amount, the base salary used is the officer’s last base salary paid by the bank and increased at a rate of three percent
(3%) per year for each year after the officer terminates employment through the officer’s normal retirement date at age 67. Consistent
with the terms of the SERP, in calculating the lump sum amount, the Corporation applies a five percent (5%) discount rate. The amount
payable under the SERP assuming that a change in control had occurred on 12/31/2020 and the officer’s employment was terminated
by the Bank without cause or the officer resigned for good reason immediately following such change in control would be $833,854 for Mr.
Hedgepeth and $628,950 for Ms. Johnson. However, with respect to all NEOs other than Mr. Tobin, any payments under the agreements that
are deemed “parachute payments” as defined in section 280G(b)(2) of the Code shall be reduced to the minimum extent necessary
that will result in no portion of the benefit payments being subject to the tax imposed by section 4999 of the Code or cause a disallowance
of the compensation deduction for the Corporation. Consequently, Mr. Hedgepeth's SERP payment has been reduced by $578,081 (the full amount
of his estimated Section 280G reduction), and Ms. Johnson's SERP payment has been reduced by $519,963 (the full amount of her estimated
Section 280G reduction).
|
Principal Executive Officer Pay Ratio
As required by SEC regulations,
the Corporation must disclose the pay ratio between the principal executive officer and the median employee for the most recently completed
fiscal year. In our case, the Corporation’s principal executive officer is William L. Hedgepeth II, our President and Chief Executive
Officer.
More particularly, Item
402(u) of the SEC’s Regulation S-K requires that the following information about the 2020 annual total compensation of our CEO and
the median employee be disclosed:
|
·
|
the annual total compensation of the median employee of all employees of
the Corporation (other than Mr. Hedgepeth, our President and CEO) for 2020, which was $58,210;
|
|
·
|
the annual total compensation of the CEO, as reported in the Summary Compensation
Table for 2020, which was $708,073;
|
|
·
|
the ratio of (i) the annual total compensation of the CEO to (ii) the annual
total compensation of the median employee for 2020, which was 12.16 to 1.
|
In determining the Corporation’s 2020 CEO
pay ratio, the Corporation utilized the same methodology that it utilized the previous fiscal year to identify the median employee for
2020. Below is a brief summary of the methodology utilized to determine the median employee of the Corporation:
|
·
|
All employees were included in the analysis as the Corporation has no employees
based outside of the United States.
|
|
·
|
Consistent with the previous year’s calculation, the Corporation used
the last day of the fiscal year, or December 31, 2020, as the fixed date for determining the Corporation’s median employee.
|
|
·
|
The median employee was identified using the following compensation measure,
which the Corporation consistently applied to all its employees: (i) total cash compensation based on payroll records, plus (ii) any employer
paid medical, dental, and life insurance premiums, plus (iii) employer-paid 401(k) match, plus (iv) FICA expense paid by employer.
|
Director Compensation
Board Fees. During 2020, each non-employee
director received a $2,500 quarterly retainer, with Mr. Ciccone, as Chairman of the Board, receiving a $2,750 quarterly retainer. Each
director also received a $1,100 fee for each meeting of the Board of Directors attended, with the Chairman receiving a $1,200 fee. Members
of all committees of the Board of Directors received $400 for each committee meeting attended, with the exception of committee chairs,
who received $500 per committee meeting attended. Mr. Hedgepeth, who is our only employee director, does not receive cash fees for his
service on the Corporation’s Board of Directors.
The Corporation has instituted a Directors’
Deferral Plan whereby individual directors may elect annually to defer receipt of all or a designated portion of their cash fees or stock
awards for the coming year. Directors’ fees otherwise payable in cash and deferred under the plan are used to purchase shares of
the Corporation’s common stock by the administrator of the Deferral Plan, with such deferred compensation disbursed in the future
as specified by the director at the time of his or her deferral election. Stock awards deferred under the Deferral Plan are also disbursed
in the future as specified by the director at the time of his or her deferral election.
Equity Awards. During 2020, the Corporation’s
directors were also eligible to receive awards granted pursuant to the terms and conditions of the Corporation’s 2018 Omnibus Stock
Incentive Plan. No stock or stock option awards were made to the Corporation’s non-employee directors during the 2020 fiscal year.
The following table presents
a summary of all compensation paid by the Corporation to its non-employee directors for their service as such during the year ended December
31, 2020.
DIRECTOR
COMPENSATION TABLE
Name
of Director(1)
|
|
Fees
Earned
or
Paid in Cash
|
|
|
Stock
Awards
|
|
|
Option
Awards
|
|
|
Total(2)
|
|
J. Gary Ciccone
|
|
$
|
40,800
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
40,800
|
|
James
H. Glen, Jr.(3)
|
|
|
23,500
|
|
|
|
—
|
|
|
|
—
|
|
|
|
23,500
|
|
Oscar
N. Harris(4)
|
|
|
4,500
|
|
|
|
—
|
|
|
|
—
|
|
|
|
4,500
|
|
Alicia Speight Hawk
|
|
|
33,800
|
|
|
|
—
|
|
|
|
—
|
|
|
|
33,800
|
|
Gerald W. Hayes
|
|
|
24,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
24,000
|
|
Ronald V. Jackson
|
|
|
24,600
|
|
|
|
—
|
|
|
|
—
|
|
|
|
24,600
|
|
John W. McCauley
|
|
|
33,300
|
|
|
|
—
|
|
|
|
—
|
|
|
|
33,300
|
|
Carlie C. McLamb, Jr.
|
|
|
32,500
|
|
|
|
—
|
|
|
|
—
|
|
|
|
32,500
|
|
V. Parker Overton
|
|
|
24,900
|
|
|
|
—
|
|
|
|
—
|
|
|
|
24,900
|
|
Anthony
E. Rand(5)
|
|
|
6,700
|
|
|
|
—
|
|
|
|
—
|
|
|
|
6,700
|
|
Sharon L. Raynor
|
|
|
25,300
|
|
|
|
—
|
|
|
|
—
|
|
|
|
25,300
|
|
K. Clark Stallings
|
|
|
30,600
|
|
|
|
—
|
|
|
|
—
|
|
|
|
30,600
|
|
W. Lyndo Tippett
|
|
|
33,800
|
|
|
|
—
|
|
|
|
—
|
|
|
|
33,800
|
|
|
(1)
|
Compensation paid to Mr. Hedgepeth, the Corporation’s only employee director, for his services as director
is included in the Summary Compensation Table for named executive officers appearing above. Mr. Hedgepeth does not receive separate cash
fees beyond his employee salary for his service on the Corporation’s Board of Directors.
|
|
(2)
|
Our outside directors receive mileage reimbursement for travel to and from board and committee meetings,
which expense reimbursements are not reflected in the table.
|
|
(3)
|
Mr. Glen resigned from the Corporation’s board of directors on November 18, 2020.
|
|
(4)
|
Mr. Harris passed away on January 28, 2020.
|
|
(5)
|
Mr. Rand passed away on May 1, 2020.
|
Set forth below is information
on the aggregate outstanding option awards, including both exercisable and unexercisable options, at the most recent fiscal year end for
the Corporation’s non-employee directors. There were no stock awards issued to the Corporation’s non-employee directors that
remained unvested and outstanding at December 31, 2020.
OUTSTANDING EQUITY AWARDS AT December 31, 2020 FOR NON-EMPLOYEE DIRECTORS
|
|
Outstanding Option Awards
|
Name
|
|
Number of securities
underlying unexercised
option awards
|
|
|
Option
exercise price
($ per share)
|
|
|
Option
Expiration
Date
|
J. Gary Ciccone
|
|
|
7,000
|
|
|
$
|
11.27
|
|
|
09/06/27
|
|
|
|
|
|
|
|
|
|
|
|
Alicia Speight Hawk
|
|
|
2,693
|
|
|
|
4.93
|
|
|
12/15/21
|
|
|
|
2,511
|
|
|
|
4.65
|
|
|
12/20/22
|
|
|
|
7,000
|
|
|
|
11.27
|
|
|
09/06/27
|
|
|
|
|
|
|
|
|
|
|
|
Gerald W. Hayes
|
|
|
7,000
|
|
|
|
11.27
|
|
|
09/06/27
|
|
|
|
|
|
|
|
|
|
|
|
Ronald V. Jackson
|
|
|
7,000
|
|
|
|
11.27
|
|
|
09/06/27
|
|
|
|
|
|
|
|
|
|
|
|
John W. McCauley
|
|
|
7,000
|
|
|
|
11.27
|
|
|
09/06/27
|
|
|
|
|
|
|
|
|
|
|
|
Carlie C. McLamb, Jr.
|
|
|
7,000
|
|
|
|
11.27
|
|
|
09/06/27
|
|
|
|
|
|
|
|
|
|
|
|
V. Parker Overton
|
|
|
2,785
|
|
|
|
4.93
|
|
|
12/15/21
|
|
|
|
2,511
|
|
|
|
4.65
|
|
|
12/20/22
|
|
|
|
7,000
|
|
|
|
11.27
|
|
|
09/06/27
|
|
|
|
|
|
|
|
|
|
|
|
Sharon L. Raynor
|
|
|
7,000
|
|
|
|
11.27
|
|
|
09/06/27
|
|
|
|
|
|
|
|
|
|
|
|
K. Clark Stallings
|
|
|
2,602
|
|
|
|
4.93
|
|
|
12/15/21
|
|
|
|
2,328
|
|
|
|
4.65
|
|
|
12/20/22
|
|
|
|
7,000
|
|
|
|
11.27
|
|
|
09/06/27
|
|
|
|
|
|
|
|
|
|
|
|
W. Lyndo Tippett
|
|
|
7,000
|
|
|
|
11.27
|
|
|
09/06/27
|
|
|
|
|
|
|
|
|
|
|
|
PROPOSAL 2: Advisory
Vote to Approve
Named
Executive Officer Compensation
Section 14A of the Exchange Act requires that
the Corporation include in its proxy statement a resolution subject to a shareholder advisory vote on the compensation paid to the
Corporation’s named executive officers as disclosed in this proxy statement (commonly referred to as a
“say-on-pay” vote). The compensation paid to the Corporation’s named executive officers is disclosed in this proxy
statement beginning with the section above entitled “Executive Compensation and Related Matters.” The compensation of
the Corporation’s named executive officers is designed to enable the Corporation and its subsidiary bank to attract and retain
talented and experienced senior executives to lead the Corporation successfully in a competitive banking environment.
Shareholders are being asked to cast a non-binding,
advisory vote on the following resolution:
“RESOLVED, that the shareholders approve,
on an advisory basis, the compensation paid to Select Bancorp, Inc.’s named executive officers, as disclosed pursuant to the compensation
disclosure rules of the Securities and Exchange Commission, including the compensation discussion and analysis, compensation tables and
the related narrative discussion in this proxy statement.”
At the Corporation’s 2019 annual meeting
of shareholders, the Board of Directors recommended, and the shareholders approved, holding this shareholder advisory vote on executive
compensation on an annual basis. This “say-on-pay” advisory vote is not binding on the Board of Directors. The vote will not
be construed to overrule any previous action or decision made by the Corporation or the Board of Directors. Although non-binding, the
Board of Directors and the Compensation Committee value constructive dialogue on executive compensation and other important governance
topics and the opinions of the Corporation’s shareholders. The Board of Directors and the Compensation Committee will review the
voting results and take them into consideration when making future decisions regarding the Corporation’s executive compensation
programs for its named executive officers.
THE
BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE “FOR” PROPOSAL 2 approving the ABOVE RESOLUTION REGARDING THE
COMPENSATION PAID TO THE corporation’s NAMED EXECUTIVE OFFICERS.
PROPOSAL 3: RATIFICATION OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM
The Board of Directors has appointed
the firm of Dixon Hughes Goodman LLP, Certified Public Accountants, as the Corporation’s independent registered public accounting
firm for 2021. A representative of Dixon Hughes Goodman LLP is expected to be present at the Annual Meeting and available to respond to
appropriate questions, and will have the opportunity to make a statement if he or she desires to do so.
The Corporation has paid Dixon
Hughes Goodman LLP fees in connection with its assistance in the Corporation’s annual audit and review of the Corporation’s
financial statements.
The following table sets forth
Dixon Hughes Goodman LLP fees in various categories during 2020 and 2019.
Fees Billed and Description of Services
|
|
2020
|
|
|
2019
|
|
Audit
Fees, includes fees for the audit of our annual financial statements, review of financial statements included in quarterly
reports on Form 10-Q, and services normally provided in connection with statutory and regulatory filings
|
|
$
|
267,436
|
|
|
$
|
222,865
|
|
|
|
|
|
|
|
|
|
|
Audit-Related
Fees, includes fees billed for assurance and related services related to the performance of the audit or review of financial
statements not included in category above
|
|
|
-0-
|
|
|
|
-0-
|
|
|
|
|
|
|
|
|
|
|
Tax Fees, including fees billed for tax compliance,
tax advice, and tax planning
|
|
|
12,725
|
|
|
|
20,000
|
|
|
|
|
|
|
|
|
|
|
All Other Fees
|
|
|
-0-
|
|
|
|
-0-
|
|
|
|
|
|
|
|
|
|
|
Total Fees
|
|
$
|
280,161
|
|
|
$
|
242,865
|
|
All services rendered by Dixon
Hughes Goodman LLP during 2020 were subject to pre-approval by the Audit and Risk Management Committee. The Audit and Risk Management
Committee has considered whether Dixon Hughes Goodman LLP’s provision of other non-audit services to the Corporation is compatible
with maintaining independence of Dixon Hughes Goodman LLP. The Audit and Risk Management Committee has determined that it is compatible
with maintaining the independence of Dixon Hughes Goodman LLP.
THE BOARD OF DIRECTORS RECOMMENDS
THAT SHAREHOLDERS VOTE “FOR” PROPOSAL 3 RATIFYING DIXON HUGHES GOODMAN LLP AS THE CORPORATION’S INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM FOR 2021.
Report of the Audit and Risk Management
Committee
The Audit and Risk Management
Committee of the Corporation is responsible for receiving and reviewing the annual audit report of the Corporation’s independent
auditors and reports of examinations by bank regulatory agencies, and helps formulate, implement, and review the Corporation’s internal
audit program. The Audit and Risk Management Committee assesses the performance and independence of the Corporation’s independent
auditors and recommends their appointment and retention. The Audit and Risk Management Committee has in place pre-approval policies and
procedures that require an evaluation of any conflicts of interest that may impair the independence of the independent auditors and pre-approval
of an engagement letter that outlines all services to be rendered by the independent auditors.
During the course of its examination
of the Corporation’s audit process in 2020, the Audit and Risk Management Committee reviewed and discussed the audited financial
statements with management. The Audit and Risk Management Committee also discussed with the independent auditors, Dixon Hughes Goodman
LLP, the matters that are required to be discussed by the applicable requirements of the Public Company Accounting Oversight Board (“PCAOB”)
and the SEC. Furthermore, the Audit and Risk Management Committee received the written disclosures and the letter from Dixon Hugues Goodman
LLP required by applicable requirements of the PCAOB regarding the independent accountant's communications with the committee concerning
independence, and has discussed with Dixon Hughes Goodman LLP their independence.
Based on the review and discussions
above, the Audit and Risk Management Committee (i) recommended to the Board that the audited financial statements be included in the Corporation’s
annual report on Form 10-K for the year ended December 31, 2020, for filing with the SEC and (ii) recommended that shareholders ratify
the appointment of Dixon Hughes Goodman LLP as independent auditors for 2021.
This report is submitted by the Audit and Risk
Management Committee:
J. Gary Ciccone
Ronald V. Jackson
K. Clark Stallings
W. Lyndo Tippett (Chair)
OTHER MATTERS
The Board of Directors knows of no other business
that will be brought before the Annual Meeting. Should other matters properly come before the meeting, the proxies will be authorized
to vote shares represented by each appointment of proxy in accordance with their best judgment on such matters.
PROPOSALS FOR 2022 ANNUAL MEETING
It is anticipated that the 2022 Annual Meeting
will be held on a date during May 2022. Any proposal of a shareholder which is intended to be presented at the 2022 Annual Meeting must
be received by the Corporation at its main office in Dunn, North Carolina no later than December 7, 2021, in order that any such proposal
be timely received for inclusion in the proxy statement and appointment of proxy to be issued in connection with that meeting. If a proposal
for the 2022 Annual Meeting is not expected to be included in the proxy statement for that meeting, the proposal must be received by the
Corporation by February 18, 2022, for it to be timely received for consideration. The proxy holders will use their discretionary authority
for any proposals received thereafter.
SHAREHOLDER COMMUNICATIONS
The Corporation does not currently have a formal
policy regarding shareholder communications with the Board of Directors; however, any shareholder may submit written communications to
Brenda B. Bonner, Vice President and Secretary, Select Bancorp, Inc., 700 West Cumberland Street, Dunn, North Carolina 28334, whereupon
such communications will be forwarded to the Board of Directors if addressed to the Board of Directors as a group or to the individual
director or directors addressed.
Internet
and Electronic Availability of Proxy Materials
As required by applicable SEC
rules and regulations, the Corporation has furnished a notice of internet availability of proxy materials to all shareholders as part
of this proxy statement and all shareholders will have the ability to access this proxy statement and the Corporation’s annual report
on Form 10-K for the fiscal year ended December 31, 2020 as filed with the SEC, by logging on at www.investorvote.com/SLCT.
ADDITIONAL INFORMATION
A COPY OF THE CORPORATION’S 2020 ANNUAL
REPORT ON FORM 10-K WILL BE PROVIDED WITHOUT CHARGE TO ANY SHAREHOLDER ENTITLED TO VOTE AT THE ANNUAL MEETING UPON THAT SHAREHOLDER’S
WRITTEN REQUEST. REQUESTS FOR COPIES SHOULD BE DIRECTED TO MARK A. JEFFRIES, EXECUTIVE VICE PRESIDENT AND CHIEF FINANCIAL OFFICER, SELECT
BANCORP, INC., 700 WEST CUMBERLAND STREET, DUNN, NORTH CAROLINA 28334, (910) 892-7080.
HOUSEHOLDING MATTERS
The SEC has adopted rules that permit
companies to deliver a single copy of proxy materials to multiple shareholders sharing an address unless a company has received
contrary instructions from one or more of the shareholders at that address. This means that only one copy of the proxy materials may
have been sent to multiple shareholders in your household. If you would prefer to receive separate copies of the proxy materials
either now or in the future, please contact our corporate secretary at the Corporation’s offices at 700 West Cumberland
Street, Dunn, North Carolina 28334 or at (910) 892-7080. Upon written or oral request to the corporate secretary, the Corporation
will provide a separate copy of the proxy materials. In addition, shareholders at a shared address who receive multiple copies of
proxy materials may request to receive a single copy of proxy materials in the future in the same manner as described above.
MMMMMMMMMMMM MMMMMMMMMMMMMMC123456789000004
ENDORSEMENT_LINE______________ SACKPACK_____________000000000.000000 ext 000000000.000000 ext 000000000.000000 ext000000000.000000 ext
000000000.000000 ext 000000000.000000 extMR A SAMPLE DESIGNATION (IF ANY) ADD 1 ADD 2 ADD 3 ADD 4 ADD 5 ADD 6Using a black ink pen, mark
your votes with an X as shown in this example. Please do not write outside the designated areas.2021 Annual Meeting Proxy CardYour vote
matters – here’s how to vote! You may vote online or by phone instead of mailing this card. Votes submitted electronically
must be received by 8:00 a.m. (Eastern time), on May 25, 2021. Online GIof ntoo welwewct.rinovneicstvoortviontge,.com/SLCT odr eslceatne
QthRe cQoRdecoadned—colongtrinold#etails are located in the shaded bar below. Phone Call toll free 1-800-652-VOTE (8683) within
the USA, US territories and Canada Save paper, time and money! Sign up for electronic delivery at www.investorvote.com/SLCT1234 5678
9012 345q IF VOTING BY MAIL, SIGN, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. qA Proposals — The Board of Directors
recommends a vote FOR all the nominees listed and FOR Proposals 2 and 3.1. Election of Directors: Proposal to elect the three nominees
listed below each for a term of three years. For Withhold For Withhold For Withhold 01 - Alicia Speight Hawk 02 - John W. McCauley 03
- Sharon L. Raynor2. Advisory Vote to Approve Named Executive Officer Compensation. A non-binding, advisory proposal to approve compensation
paid to the Corporation's named executive officers as disclosed in the proxy statement.For Against Abstain For Against Abstain 3. Ratification
of Accounting Firm. Proposal to ratify the appointment of Dixon Hughes Goodman LLP as the Corporation’s independent registered
accounting firm for 2021.B Authorized Signatures — This section must be completed for your vote to count. Please date and sign
below.Please sign exactly as name(s) appears hereon. Joint owners should each sign. When signing as attorney, executor, administrator,
corporate officer, trustee, guardian, or custodian, please give full title.Date (mm/dd/yyyy) — Please print date below. Signature
1 — Please keep signature within the box. Signature 2 — Please keep signature within the box.MMMMMMC 1234567890 J N T 1 U
P X 5 0 1 2 7 6MR A SAMPLE (THIS AREA IS SET UP TO ACCOMMODATE 140 CHARACTERS) MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE
AND MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND03FCGB
2021 Annual Meeting Admission
Ticket 2021 Annual Meeting of Select Bancorp, Inc. Tuesday, May 25, 2021, 10:00 a.m. Eastern Time Select Bank & Trust 700 West Cumberland
Street Dunn, North Carolina 28334 Upon arrival, please present this admission ticket and photo identification at the registration desk.Important
notice regarding the Internet availability of proxy materials for the Annual Meeting of Shareholders. The material is available at: www.investorvote.com/SLCTSmall
steps make an impact. Help the environment by consenting to receive electronic delivery, sign up at www.investorvote.com/SLCTq IF VOTING
BY MAIL, SIGN, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. qSelect Bancorp, Inc. - Revocable Proxy + Notice of 2021
Annual Meeting of Shareholders Appointment of Proxy Solicited by Board of Directors for 2021 Annual Meeting — May 25, 2021The undersigned
hereby appoints J. Gary Ciccone, Carlie C. McLamb, Jr., and V. Parker Overton (the “Proxies”), or any of them, as attorneys
and proxies, with full power of substitution, to vote all shares of the common stock of Select Bancorp, Inc., Dunn, North Carolina (the
“Corporation”) held of record by the undersigned on March 26, 2021, at the Annual Meeting of Shareholders of the Corporation
to be held at the Corporation’s main office located at, 700 West Cumberland Street, Dunn, North Carolina 28334, at 10:00 a.m. on
May 25, 2021, and at any adjournments thereof. The undersigned hereby directs that the shares represented by this appointment of proxy
be voted as directed herein. In the absence of any instructions, the Proxies will vote such shares “FOR” the election of
each nominee named in Proposal 1 and “FOR” Proposals 2 and 3. If, at or before the time of the Annual Meeting, any of the
nominees listed in Proposal 1 for any reason have become unavailable for election or unable to serve as directors, the Proxies are hereby
granted discretion to vote for a substitute nominee or nominees. On such other matters as may properly come before the Annual Meeting,
the Proxies are authorized to vote the shares represented by this appointment of proxy in accordance with their best judgment.(Items
to be voted appear on reverse side)C Non-Voting ItemsChange of Address — Please print new address below. Comments — Please
print your comments below.+
MMMMMMMMMMMMUsing a black
ink pen, mark your votes with an X as shown in this example. Please do not write outside the designated areas.2021 Annual Meeting Proxy
Cardq IF VOTING BY MAIL, SIGN, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. qA Proposals — The Board of Directors
recommends a vote FOR all the nominees listed and FOR Proposals 2 and 3.1. Election of Directors: Proposal to elect the three nominees
listed below each for a term of three years. For Withhold For Withhold For Withhold 01 - Alicia Speight Hawk 02 - John W. McCauley 03
- Sharon L. Raynor2. Advisory Vote to Approve Named Executive Officer Compensation. A non-binding, advisory proposal to approve compensation
paid to the Corporation's named executive officers as disclosed in the proxy statement.For Against Abstain For Against Abstain 3. Ratification
of Accounting Firm. Proposal to ratify the appointment of Dixon Hughes Goodman LLP as the Corporation’s independent registered
accounting firm for 2021.B Authorized Signatures — This section must be completed for your vote to count. Please date and sign
below.Please sign exactly as name(s) appears hereon. Joint owners should each sign. When signing as attorney, executor, administrator,
corporate officer, trustee, guardian, or custodian, please give full title.Date (mm/dd/yyyy) — Please print date below. Signature
1 — Please keep signature within the box. Signature 2 — Please keep signature within the box.03FCHB1 U P X5 0 1 2 7 6 +
Important notice regarding
the Internet availability of proxy materials for the Annual Meeting of Shareholders. The material is available at: www.edocumentview.com/SLCTq
IF VOTING BY MAIL, SIGN, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. qSelect Bancorp, Inc. - Revocable ProxyNotice
of 2021 Annual Meeting of Shareholders Appointment of Proxy Solicited by Board of Directors for 2021 Annual Meeting — May 25, 2021
The undersigned hereby appoints J. Gary Ciccone, Carlie C. McLamb, Jr., and V. Parker Overton (the “Proxies”), or any of
them, as attorneys and proxies, with full power of substitution, to vote all shares of the common stock of Select Bancorp, Inc., Dunn,
North Carolina (the “Corporation”) held of record by the undersigned on March 26, 2021, at the Annual Meeting of Shareholders
of the Corporation to be held at the Corporation’s main office located at, 700 West Cumberland Street, Dunn, North Carolina 28334,
at 10:00 a.m. on May 25, 2021, and at any adjournments thereof. The undersigned hereby directs that the shares represented by this appointment
of proxy be voted as directed herein. In the absence of any instructions, the Proxies will vote such shares “FOR” the election
of each nominee named in Proposal 1 and “FOR” Proposals 2 and 3. If, at or before the time of the Annual Meeting, any of
the nominees listed in Proposal 1 for any reason have become unavailable for election or unable to serve as directors, the Proxies are
hereby granted discretion to vote for a substitute nominee or nominees. On such other matters as may properly come before the Annual
Meeting, the Proxies are authorized to vote the shares represented by this appointment of proxy in accordance with their best judgment.(Items
to be voted appear on reverse side)
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