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SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement
[_] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
BANK OF GRANITE CORPORATION
------------------------------------------------
(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
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[_] Fee paid previously with preliminary materials:
[_] 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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BANK OF
GRANITE
C O R P O R A T I O N
23 NORTH MAIN STREET
GRANITE FALLS, NORTH CAROLINA 28630
(704) 496-2000
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS - APRIL 23, 2001
TO OUR SHAREHOLDERS:
The Annual Meeting of Shareholders of Bank of Granite Corporation will be held
on Monday, April 23, 2001 at 10:30 a.m. local time. The meeting will be held at
the Holiday Inn - Select, 1385 Lenoir Rhyne Boulevard, S.E. (at Interstate 40,
Exit #125), Hickory, North Carolina for the following purposes:
1. To consider the election of seven persons named as
directors/nominees in the Proxy Statement dated March 23,
2001, which accompanies the Notice;
2. To consider the Bank of Granite Corporation's proposed 2001
Incentive Stock Option Plan;
3. To consider the ratification of the selection of Deloitte &
Touche LLP as Bank of Granite Corporation's independent
Certified Public Accountants for the fiscal year ending
December 31, 2001; and
4. To transact such other business as may properly be brought
before the meeting or any adjournment thereof.
Only shareholders of record at the close of business on March 5, 2001 are
entitled to receive notice of, and to vote at, this meeting.
Bank of Granite Corporation's 2001 Annual Shareholders Meeting proxy Ballot,
Proxy Statement and its 2000 Annual Report are enclosed with this Notice.
YOUR VOTE AND PROMPT RESPONSE IS IMPORTANT. TO ASSURE YOUR REPRESENTATION AT THE
MEETING, PLEASE MARK, SIGN, DATE AND PROMPTLY RETURN YOUR PROXY IN THE ENVELOPE
PROVIDED FOR THAT PURPOSE. IF YOU ATTEND THE MEETING, YOU MAY OF COURSE,
WITHDRAW YOUR PROXY AND VOTE IN PERSON. YOUR PROMPT RESPONSE WILL SAVE YOUR
COMPANY THE EXPENSES AND EXTRA WORK OF ADDITIONAL SOLICITATION.
By order of the Board of Directors
BANK OF GRANITE CORPORATION
/s/ John A. Forlines, Jr.
Granite Falls, North Carolina JOHN A. FORLINES, JR.
March 23, 2001 Chairman and Chief Executive Officer
3
[Map to Annual Meeting location presented here]
4
BANK OF
GRANITE
C O R P O R A T I O N
- --------------------------------------------------------------------------------
PROXY STATEMENT
- --------------------------------------------------------------------------------
SOLICITATION, VOTING AND REVOCABILITY OF PROXY
General
The accompanying Proxy is solicited by the Board of Directors of Bank of Granite
Corporation (the "Company") for use at the Annual Meeting of Shareholders to be
held on April 23, 2001, and any adjournment thereof. The time and place of the
meeting is set forth in the accompanying Notice of Meeting. The approximate date
on which this Proxy Statement and the accompanying Proxy are first being sent or
given to Shareholders of the Company is March 23, 2001
A COPY OF THE COMPANY'S 2000 ANNUAL REPORT INCLUDING FINANCIAL STATEMENTS IS
INCLUDED WITH THIS PROXY STATEMENT AND HAS BEEN SENT TO EACH PERSON WHO WAS A
SHAREHOLDER OF RECORD AS OF THE CLOSE OF BUSINESS ON MARCH 5, 2001. THE COMPANY
WILL ALSO PROVIDE TO ANY SHAREHOLDER, WITHOUT CHARGE, A COPY OF THE ANNUAL
REPORT FOR 2000 FILED ON FORM 10-K WITH THE SECURITIES AND EXCHANGE COMMISSION
(THE "SEC") UPON WRITTEN REQUEST TO KIRBY A. TYNDALL, SECRETARY, BANK OF GRANITE
CORPORATION, P.O. BOX 128, GRANITE FALLS, NORTH CAROLINA, 28630. SHAREHOLDERS
AND OTHER INTERESTED PARTIES MAY ALSO OBTAIN THE COMPANY'S RECENT FILINGS WITH
THE SEC FROM THE COMPANY'S INTERNET SITE AT WWW.BANKOFGRANITE.COM OR THROUGH THE
SEC'S INTERNET SITE AT WWW.SEC.GOV BY SEARCHING FOR THE COMPANY'S CENTRAL INDEX
KEY OF 0000810689.
Solicitation
All expenses of preparing, printing, and mailing the Proxy and all material used
in the solicitation thereof will be borne by the Company. In addition to the use
of the mails, proxies may be solicited in person or by telephone by directors,
officers, and other employees of the Company, none of whom will receive
additional compensation for their services.
Revocability of Proxy
This proxy shall be revocable at any time prior to its exercise by filing a
written request with Kirby A. Tyndall, Secretary of the Company, by voting in
person at the Shareholders' Meeting, or by presenting a duly executed proxy
bearing a later date.
Voting Securities and Vote Required for Approval
At the close of business on March 5, 2001, the record date, the Company had
11,136,689 shares of Common Stock outstanding, par value $1.00 per share, which
is the only class of stock outstanding. Only the holders of record of Common
Stock of the Company at the close of business on March 5, 2001 are entitled to
receive notice of the Annual Meeting of Shareholders and to vote on such matters
to come before the Annual Meeting or any adjournment thereof.
Presence, in person or by proxy, of the holders of a majority of the outstanding
shares of Common Stock of the Company entitled to vote at the Annual Meeting is
necessary to constitute a quorum at the Annual Meeting and any adjournment
thereof.
Except for Proposal 1 (the Election of Directors) under which the directors are
elected by plurality, the approval of Proposal 2 (the 2001 Incentive Stock
Option Plan) and Proposal 3 (the Ratification of the Selection of the Company's
Independent Accountants), and approval of all other items which may be submitted
to the shareholders for their consideration at the Annual Meeting requires the
affirmative vote of a majority of shares present and voting. Each shareholder is
entitled to one (1) vote for each share of Common Stock held by him or her at
the close of business on the record date, March 5, 2001. Cumulative voting is
not permitted, and shareholders do not have dissenters rights with respect to
any of the matters to be considered.
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On all proposals, an abstention will have the same effect as a negative vote
but, because shares held by brokers will not be considered entitled to vote on
matters as to which the brokers withhold authority, a broker non-vote will have
no effect on the outcome of the vote on such proposals.
The Board of Directors unanimously recommends a vote in favor of Proposals 1, 2
and 3. Each Proxy, unless the shareholder otherwise specifies, will be voted in
favor of Proposals 1, 2 and 3. In each case where the shareholder has
appropriately specified how the Proxy is to be voted, it will be voted in
accordance with his or her specifications. Executed but unmarked Proxies that
are returned to the Company will be voted (1) in favor of the proposed slate of
directors, (2) in favor of the proposed 2001 Incentive Stock Option Plan and (3)
in favor of the ratification of Deloitte & Touche LLP as the Company's
independent accountants. Shareholders may designate a person or persons other
than those named in the enclosed Proxy to vote their shares at the Annual
Meeting or any adjournment thereof. As to any other matter or business which may
be brought before the Annual Meeting or any adjournment thereof, a vote may be
cast pursuant to the accompanying Proxy in accordance with the judgment of the
person or persons voting the same, but the management and Board of the Company
do not know of any other matter or business to come before the Annual Meeting.
PRINCIPAL HOLDERS OF VOTING SECURITIES
To the knowledge of the Company, no individual shareholder owned beneficially
more than five percent (5%) of the Company's outstanding Common Stock on the
record date. Company Common Stock is held by Cede & Co. as nominee of securities
depositories for various segments of the financial industry. As of the record
date, Cede & Co. held shares registered in street name for approximately 2,800
individuals and organizations.
On the record date, the Company's Common Stock was owned by approximately 5,300
individuals and other entities, holding Stock either as holders of record,
holders of shares registered in street name or as beneficial owners.
INFORMATION ABOUT THE BOARD OF DIRECTORS
AND COMMITTEES OF THE BOARD
The Boards of Directors of both the Bank of Granite Corporation and its bank
subsidiary, Bank of Granite (the "Bank") are composed of the same persons. The
Board of Directors of the Company's mortgage bank subsidiary, GLL & Associates,
Inc. ("GLL") is composed of the Company's President, the Company's
Secretary/Treasurer and GLL's President.
During the fiscal year ended December 31, 2000, the Company's Board of Directors
held 10 meetings, the Bank's Board of Directors held 12 meetings and GLL's Board
of Directors held 4 meetings. All members of the Boards of Directors attended
more than 75% of the total number of meetings of the Boards of Directors and the
total number of meetings held by committees of the Boards of which they are
members.
The boards of directors for the Company and Bank are composed of the same
persons, and the directors are paid an annual retainer of $6,000 and fees of
$200 for attendance at each monthly and special meeting of the Company's Board.
GLL directors were paid $200 for attendance at each quarterly meeting of GLL's
Board. Directors received no additional compensation for attending committee
meetings. The Bank's Board of Directors supervises the Bank's compensation
matters and functions as the Bank's executive committee. The Company's Board has
standing audit and nominating committees. The functions, composition and
frequency of meetings for the audit and nominating committees in fiscal year
2000 were as follows:
NOMINATING COMMITTEE - The Nominating Committee is composed of directors John A.
Forlines, Jr., Barbara F. Freiman, Hugh R. Gaither and Charles M. Snipes. The
Nominating Committee makes recommendations to the Board of Directors with
respect to nominees for election as directors. The Nominating Committee would
consider shareholder nominees for Company and Bank Board membership. Any
shareholder wishing to nominate a candidate for director must follow the
procedures set forth in the section of this Proxy Statement entitled "Proposals
For 2002 Annual Shareholders Meeting." During 2000, the Nominating Committee
held 1 meeting.
COMPENSATION COMMITTEE - The Company's entire Board of Directors, which acts as
the Compensation Committee, annually reviews and approves the compensation of
all of the Company's executive officers and considers recommendations by the
Company's management regarding the granting of incentive stock options. The
Compensation Committee reports annually to the Company's shareholders as set
forth in the section of this Proxy Statement entitled "Board Report On Executive
Officer Compensation." During 2000, the Compensation Committee held 2 meetings.
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AUDIT COMMITTEE - The Audit Committee is composed of directors Paul M.
Fleetwood, III, CPA, Barbara F. Freiman and Boyd C. Wilson, Jr., CPA. The Audit
Committee, whose members are neither officers nor employees of the Company or
Bank, provides general oversight of the internal audit function, reviews the
findings of external audits and examinations, evaluates the adequacy of the
Bank's insurance coverage, and reviews the activities of the Bank's regulatory
compliance efforts. All of the members of the Audit Committee are "independent"
within the meaning of the rules promulgated by the Nasdaq Stock Market(R).
During 2000, 12 meetings were held. All Audit Committee members attended more
than 75% of the total number of Audit Committee meetings held during the fiscal
year 2000.
AUDIT COMMITTEE REPORT AND CHARTER
AUDIT COMMITTEE REPORT
In accordance with its written charter (a copy of which is attached hereto as
Appendix A) adopted by the Board of Directors (the "Board"), the Audit Committee
of the Board (the "Audit Committee") assists the Board in fulfilling its
responsibility for oversight of the quality and integrity of the accounting,
auditing and financial reporting practices of the Company. During 2000, the
Audit Committee held 12 meetings, and the Audit Committee Chair, as
representative of the Audit Committee, discussed the interim financial
information contained in each quarterly report with the CFO and independent
auditors prior to the publication or filing of such quarterly report.
In discharging its oversight responsibility as to the audit process, the Audit
Committee obtained from the independent auditors a formal written statement
describing all relationships between the auditors and the Company that might
bear on the auditors' independence consistent with Independence Standards Board
Standard No. 1, "Independence Discussions with Audit Committees," discussed with
the auditors any relationships that may impact their objectivity and
independence and satisfied itself as to the auditors' independence. The Audit
Committee also discussed with management, the internal auditors and the
independent auditors the quality and adequacy of the Company's internal controls
and the internal audit function's organization, responsibilities, budget and
staffing and concurred in the appointment of a new director of internal audit.
The Audit Committee reviewed with both the independent and the internal auditors
their audit plans, audit scope, and identification of audit risks.
The Audit Committee discussed and reviewed with the independent auditors all
communications required by generally accepted auditing standards, including
those described in Statement on Auditing Standards No. 61, as amended,
"Communication with Audit Committees" and, with and without management present,
discussed and reviewed the results of the independent auditors' examination of
the financial statements. The Audit Committee also discussed the results of the
internal audit examinations.
The Audit Committee reviewed the audited financial statements of the Company as
of and for the year ended December 31, 2000, with management and the independent
auditors. Management has the responsibility for the preparation of the Company's
financial statements and the independent auditors have the responsibility for
the examination of those statements.
Based on the above-mentioned review and discussions with management and the
independent auditors, the Audit Committee recommended to the Board that the
Company's audited financial statements be included in its Annual Report on Form
10-K for the fiscal year ended December 31, 2000, for filing with the Securities
and Exchange Commission. The Audit Committee also recommended the reappointment,
subject to shareholder approval, of the independent auditors and the Board
concurred in such recommendation.
The Audit Committee has considered whether the provision of non-audit services
by its independent auditors is compatible with maintaining the principal
accountant's independence.
BANK OF GRANITE CORPORATION
Audit Committee of the Board of Directors
-----------------------------------------
Paul M. Fleetwood, III, CPA, Chair
Barbara F. Freiman
Boyd C. Wilson, Jr., CPA
AUDIT COMMITTEE CHARTER
The Audit Committee Charter, approved by the Board on May 8, 2000, is attached
hereto as Appendix A.
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ELECTION OF DIRECTORS/NOMINEES
(PROPOSAL 1)
Seven (7) directors are being considered for election at the Annual Meeting,
each to hold office for one year or until a successor is elected and qualified.
The Company Board's directors/nominees are shown below along with biographical
summaries and beneficial ownership of Common Stock. The information is
presented, unless otherwise indicated, as of March 5, 2001.
All of the directors/nominees shown below have been previously elected as
directors by the Company's shareholders and are currently serving on the Board
of Directors.
In the event a director/nominee declines or is unable to serve as director,
which is not anticipated, the shares represented by proxy will be voted for the
Board's substitute nominee.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE SHAREHOLDERS ELECT THE
DIRECTORS/NOMINEES SHOWN IN THE FOLLOWING TABLE BY VOTING FOR PROPOSAL 1.
DIRECTORS/NOMINEES AND NONDIRECTOR EXECUTIVE OFFICERS
Biographical summaries of the Company's directors/nominees and executive
officers for the last five years are presented below.
DIRECTORS/NOMINEES
John N. Bray is President of Vanguard Furniture, Inc., a furniture manufacturing
company headquartered in Hickory, North Carolina, where he has served in such
capacity since 1970. Mr. Bray has also served as Director of Vanguard Furniture
since 1970 and as Director of the Company and Bank since 1992.
Paul M. Fleetwood, III, CPA is President of Corporate Management Services, Inc.,
a real estate management company, and Catawba Valley Building Supply, Inc., a
retail supplier of building materials, both of Hickory, North Carolina, where he
has served in such capacities since 1977. Mr. Fleetwood has served as Director
of the Company and Bank since 1998.
John A. Forlines, Jr. has served as Chairman and Chief Executive Officer of the
Company since 1987 and as Chairman of the Bank since 1972. Mr. Forlines served
as Chief Executive Officer of the Bank from 1954 until 1994. Mr. Forlines has
served as Director of the Company since 1987 and Bank since 1954.
Barbara F. Freiman has served as a fund raising consultant since 2000. Prior to
2000, Ms. Freiman served as Executive Director of the Foundation of Caldwell
Community College and Technical Institute from 1986 until 2000. Ms. Freiman has
served as Director of the Company and Bank since 1989.
Hugh R. Gaither is President and Chief Executive Officer of Ridgeview, Inc., a
hosiery manufacturer headquartered in Newton, North Carolina, where he has
served in such capacity since 1975. Mr. Gaither has served as Director of the
Company and Bank since 1997.
Charles M. Snipes has served as President of the Company since 1994 and as
President and Chief Executive Officer of the Bank since 1994. Mr. Snipes has
served as Director of the Company since 1987 and the Bank since 1982. Mr. Snipes
has also served as Chairman and Director of GLL since 1997. In addition, Mr.
Snipes has served as Director of Vanguard Furniture, Inc. since 1969.
Boyd C. Wilson, Jr., CPA is Vice President and Controller of Kincaid Furniture
Company, Inc., a furniture manufacturer located in Hudson, North Carolina, where
he has served in such capacity since 1990. Mr. Wilson has served as Director of
the Company and Bank since 1996.
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NONDIRECTOR EXECUTIVE OFFICERS
Kirby A. Tyndall, CPA is Senior Vice President, Secretary, Treasurer and Chief
Financial Officer of the Company, Bank and GLL, where he has served in such
capacities since 1997. Mr. Tyndall has also served as Director of GLL since
1997. From 1989 until 1997, Mr. Tyndall served as Senior Vice President and
Chief Financial Officer of another community bank in North Carolina.
Gary L. Lackey is President and Chief Executive Officer of GLL, where he has
served in such capacities since he founded GLL in 1985. Mr. Lackey has also
served as Director of GLL since 1985. The Company acquired GLL in 1997.
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The number of shares of Bank of Granite Corporation stock beneficially owned by
the directors/nominees and nondirector executive officers are those owned as of
March 5, 2001. Unless otherwise indicated, each director/nominee or nondirector
executive officer has sole voting power (or shares such power with his or her
spouse) with respect to the shares set forth in the following table. The source
of information provided in the table is the Company's shareholder records.
- ------------------------------------------------------------------------------------------------------------------------
Name of Director
---------------------- Principal Occupation Age on Since (1) Amount and Nature Ownership
Director/Nominee (d/n) during last five years Dec. 31, ----------- of Beneficial as % of
or Nondirector 2000 Company (c) Ownership Common
Executive Officer (e) Bank (b) Stock
GLL (g)
- ------------------------------------------------------------------------------------------------------------------------
JOHN N. BRAY (d/n) President, Vanguard 58 1992 (c) 4,086 direct 0.05%
Hickory, N.C. Furniture, Inc. 1992 (b) 1,175 indirect(2)
- ------------------------------------------------------------------------------------------------------------------------
PAUL M. FLEETWOOD, President, Corporate 53 1998 (c) 112,500 direct 1.01%
III, CPA (d/n) Management Services, 1998 (b) - indirect
Hickory, N.C. Inc. and Catawba Valley
Building Supply, Inc.
- ------------------------------------------------------------------------------------------------------------------------
JOHN A. FORLINES, JR. Chairman and Chief 82 1987 (c) 536,867 direct 4.91%
(d/n)(e) Executive Officer of the 1954 (b) 10,500 indirect(3)
Granite Falls, N.C. Company (since 1987);
Chairman of the Bank
(since 1972); (Chief
Executive Officer of
the Bank, 1954-94)
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BARBARA F. FREIMAN (d/n) Fund Raising Consultant 66 1989 (c) 6,674 direct 0.08%
Lenoir, N.C. 1989 (b) 2,300 indirect(2)
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HUGH R. GAITHER (d/n) President and Chief 50 1997 (c) 216 direct 0.00%
Newton, N.C. Executive Officer, 1997 (b) - indirect
Ridgeview, Inc.
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CHARLES M. SNIPES President of the 67 1987 (c) 133,137 direct 1.48%
(d/n)(e) Company (since 1994); 1982 (b) 31,750 indirect(2,3)
Hickory, N.C. President and Chief 1997 (g)
Executive Officer of the
Bank (since 1994);
Chairman and Director
of GLL; Director of
Vanguard Furniture, Inc.
- ------------------------------------------------------------------------------------------------------------------------
BOYD C. WILSON, Vice President and 48 1996 (c) 5,440 direct 0.10%
JR., CPA (d/n) Controller, Kincaid 1996 (b) 5,947 indirect(2)
Hudson, N.C. Furniture Company
- ------------------------------------------------------------------------------------------------------------------------
KIRBY A. TYNDALL, CPA Secretary, Treasurer and 45 1997 (g) 1,875 direct 0.06%
(e) Chief Financial Officer 4,350 indirect (3)
Hickory, N.C. of the Company,
Bank and GLL;
Director of GLL
- ------------------------------------------------------------------------------------------------------------------------
GARY L. LACKEY (e) Chief Executive Officer 50 1985 (g) 1,500 direct 0.02%
Clemmons, N.C. and Director of GLL 700 indirect (3)
- ------------------------------------------------------------------------------------------------------------------------
DIRECTORS AND EXECUTIVE OFFICERS 802,295 direct 7.71%
AS A GROUP (9 PERSONS) 56,722 indirect
- ------------------------------------------------------------------------------------------------------------------------
Notes: (1) Bank of Granite Corporation, the holding company for Bank of
Granite, was organized on January 30, 1987.
(2) Shares of stock indirectly owned include those held in their
spouse's name or by corporations controlled by such
individuals.
(3) The indirect stock ownership shown for the executive officers
consists of those shares of Company Common Stock obtainable by
such individuals within 60 days of March 5, 2001.
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SUMMARY COMPENSATION TABLE
The following table summarizes current and long-term compensation and provides
separate columns for stock- related compensation for each executive officer of
the Company and its subsidiaries, Bank of Granite ("Bank") and GLL & Associates,
Inc. ("GLL") whose total salary and bonus exceeded $100,000 for 2000.
- -----------------------------------------------------------------------------------------------------------
Compensation
-----------------------------------------------------
Annual
-------------------------- Long-term
Securities All Other
Name and Base Underlying Compen-
Principal Position Year Salary Bonus (1) Options (2) sation (3)
- -----------------------------------------------------------------------------------------------------------
JOHN A. FORLINES, JR. 2000 $ 249,100 $ 45,300 none $ 53,726
Company Chairman and Chief 1999 $ 235,000 $ 45,700 5,000 $ 42,859
Executive Officer; Bank Chairman 1998 $ 225,250 $ 45,800 4,375 $ 30,353
- -----------------------------------------------------------------------------------------------------------
CHARLES M. SNIPES 2000 $ 195,000 $ 36,200 none $ 47,716
Company President; 1999 $ 187,500 $ 36,500 5,000 $ 37,429
Bank President and Chief Executive 1998 $ 180,250 $ 36,800 4,375 $ 27,683
Officer; GLL Chairman and Director
- -----------------------------------------------------------------------------------------------------------
KIRBY A. TYNDALL, CPA 2000 $ 100,000 $ 18,500 none $ 18,821
Company, Bank and GLL 1999 $ 90,000 $ 17,800 3,000 $ 13,874
Secretary, Treasurer and Chief 1998 $ 85,000 $ 17,400 3,125 $ 9,114
Financial Officer, GLL Director
- -----------------------------------------------------------------------------------------------------------
GARY L. LACKEY 2000 $ 120,000 $ 13,722 none $ 13,000
GLL President and Chief Executive 1999 $ 100,000 $ 60,316 1,000 $ 12,600
Officer, GLL Director 1998 $ 72,000 $ 80,606 1,250 $ 11,500
- -----------------------------------------------------------------------------------------------------------
Notes: (1) Figures shown represent actual incentive cash bonuses earned
and accrued during the year indicated.
(2) Figures shown represent number of shares of Company Common
Stock subject to options which were awarded to the named
executive officers shown during the years indicated.
(3) Figures shown include amounts contributed by the Bank to its
Profit-sharing Plan and by GLL to its 401(k) Plan (the
"Plans") and allocated to the indicated executive officer's
accounts. The plans are "tax qualified" under section 401(a)
of the Internal Revenue Code and cover all employees. The
following amounts were contributed to the indicated accounts:
Mr. Forlines $25,500 in 2000, $19,200 in 1999 and $12,800 in
1998; Mr. Snipes $25,500 in 2000, $19,200 in 1999 and $12,800
in 1998; Mr. Tyndall $17,670 in 2000, $12,936 in 1999 and
$8,192 in 1998; and Mr. Lackey $5,000 in 2000, $4,600 in 1999
and $3,500 in 1998.
Figures shown also indicate amounts contributed by the Bank to
the indicated executive officer's Supplemental Executive
Retirement Plan ("SERP") accounts. Because of Internal Revenue
Code limitations on amounts which can be contributed to the
named executive's Profit-sharing Plan accounts, the SERP was
implemented by the Bank during 1994 to help replace those
contributions "lost" by the named executives due to these
limitations. Participation in the SERP is determined by the
Board of Directors. The SERP is not a qualified plan under the
Internal Revenue Code. Contribution earnings are determined by
the Compensation Committee. The following amounts were
contributed to the indicated accounts: Mr. Forlines $18,721 in
2000, $15,039 in 1999, and $9,248 in 1998; and Mr. Snipes
$9,225 in 2000, $7,716 in 1999 and $4,566 in 1998.
The Bank's Profit-Sharing Plan and related SERP are
noncontributory defined contribution plans. The Company, Bank
and GLL do not currently offer defined benefit plans as a part
of employee benefits.
The remaining amounts include (i) the value of certain life
insurance premiums paid for the indicated executives, based on
the term insurance value of such payments as calculated under
the Internal Revenue Code P.S. 58 rates or those of the
insurer, if lower, and includable in the executive's taxable
income for the year, (ii) the value of the personal use
portion of the Company's vehicles provided to the executive
and (iii) director fees. In 2000, the value of life insurance
premiums paid were $470 for Mr. Forlines, $2,671 for Mr.
Snipes and $351 for Mr. Tyndall. Also for 2000, the values for
the personal use of vehicles were $635 for Mr. Forlines,
$1,120 for Mr. Snipes and $7,200 for Mr. Lackey. Director fees
for 2000 were $8,400 for Mr. Forlines, $9,200 for Mr. Snipes,
$800 for Mr. Tyndall and $800 for Mr. Lackey.
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OPTION/SAR GRANTS IN LAST FISCAL YEAR
The Company granted no incentive stock options or stock appreciation rights
("SAR's") to the named officers during 2000.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
LAST FISCAL YEAR- END OPTION VALUES
The following table sets forth information with respect to the exercise of stock
options by the named officers during 2000 and unexercised options held as of
December 31, 2000.
- ------------------------------------------------------------------------------------------------------------------------
Shares Number of Securities Value of Unexercised
Acquired Value Underlying In-the-Money
Name and on Exercise Realized Unexercised Options at Options at
Principal Position (1) (2) Fiscal Year-end Fiscal Year-end (3)
- ------------------------------------------------------------------------------------------------------------------------
JOHN A. FORLINES, JR. 6,562 $ 52,568 Exercisable 9,625 Exercisable $ 29,435
Company Chairman and Chief Unexercisable 7,500 Unexercisable $ 5,444
Executive Officer; Bank Chairman
- ------------------------------------------------------------------------------------------------------------------------
CHARLES M. SNIPES 6,562 $ 52,568 Exercisable 9,625 Exercisable $ 29,435
Company President; Unexercisable 7,500 Unexercisable $ 5,444
Bank President and Chief Executive
Officer; GLL Chairman and Director
- ------------------------------------------------------------------------------------------------------------------------
KIRBY A. TYNDALL, CPA - $ - Exercisable 4,350 Exercisable $ 1,225
Company, Bank and GLL Unexercisable 4,900 Unexercisable $ 2,556
Secretary, Treasurer and Chief
Financial Officer, GLL Director
- ------------------------------------------------------------------------------------------------------------------------
GARY L. LACKEY - $ - Exercisable 700 Exercisable $ 200
GLL President and Chief Executive Unexercisable 1,550 Unexercisable $ 800
Officer, GLL Director
- ------------------------------------------------------------------------------------------------------------------------
Notes: (1) Indicates number of shares acquired by indicated executive
officer through the exercise of options during 2000.
(2) Dollar amounts represent the aggregate dollar value realized
by the indicated executive officer upon the exercise of
options during 2000. The aggregate dollar value realized is
calculated based on the difference between the fair market
value of Company Common Stock on the date of exercise, less
the underlying option's exercise or base price.
(3) Dollar amounts shown represent the value of stock options held
by the indicated executive officers at year end 2000. Only
those options which are "in the money" are reported. An option
is considered to be "in the money" if the fair market value of
the Company's Common Stock exceeds the exercise or base price
of the shares subject to the options at year end 2000. For
those options "in the money", value is computed based on the
difference between fair market value of Company Common Stock
at year end 2000 and the exercise or base price of the shares
subject to the options. The value of options exercisable and
unexercisable at year end 2000 is also shown.
EMPLOYMENT CONTRACTS AND CHANGE-IN-CONTROL AGREEMENTS
The Company does not currently have employment contracts or change-in-control
agreements with its executive or senior officers or key employees, except as
follows:
GARY L. LACKEY EMPLOYMENT AND NONCOMPETITION AGREEMENT
Mr. Lackey joined the Company in November 1997 when the Company acquired GLL,
which he founded. Mr. Lackey and GLL entered into an Employment and
Noncompetition Agreement (the "Agreement"), which is effective until December
31, 2003. The Agreement addresses, among other issues, Mr. Lackey's
compensation, benefits and perquisites and agreement not to compete with GLL
under certain circumstances. The non-competition provisions are no longer
applicable if there is a change in control of the Company, as defined in the
Agreement.
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BOARD REPORT ON EXECUTIVE OFFICER COMPENSATION
All compensation paid to the Company's executive officers is paid by the Bank to
such persons in their capacity as executive officers of the Bank. Accordingly,
the compensation of such executives is reviewed and approved annually by the
full Board of Directors of both the Bank and the Company, which consist of the
same persons. This report is furnished by the Company's Board of Directors,
which acts as the Company's Compensation Committee (the "Compensation
Committee").
The fundamental philosophy of Bank of Granite Corporation's compensation program
is to offer competitive compensation opportunities for all executive officers
which are based both on the individual's contribution and on the Company's
performance. The compensation paid is designed to retain and reward executive
officers who are capable of leading the Company in achieving its business
objectives in an industry characterized by complexity, competitiveness, and
change. Annual compensation for the Company's CEO (and other executive officers)
consists of three elements:
- Base salary;
- An annual cash incentive that is directly and indirectly
linked to Company and individual performance (with Company
performance measured on the basis of Return on Assets); and
- Long-term equity participation, consisting of the issuance of
stock options, designed to better align the interests of
executive officers with those of the Company's shareholders.
For the Company's executives (and CEO), base salary is targeted to approximate
average salaries for individuals in similar positions with similar levels of
responsibilities who are employed by other banking organizations of similar
size. The Company frequently participates in local, state, and other
salary/compensation surveys and has access to other published
salary/compensation data. The results of such surveys are used by the
Compensation Committee in helping to set appropriate levels of Company CEO and
other executive officer base salaries.
For 2000, the Compensation Committee increased the CEO's base salary by 6.0%.
The Compensation Committee determined that the 6.0% increase in the CEO's base
salary was appropriate in light of two primary factors. The first factor was a
desire by the Company to provide the CEO with a base salary comparable to that
paid by other banking organizations of similar size and financial performance.
The Company's Board of Directors annually reviews national, regional, statewide
and local peer group salary data (to the extent available) in its determination
of a comparable base salary. A second factor considered by the Compensation
Committee was that the Company's 2.46% return on assets placed the Company among
the banking industry's top performers during 1999.
For the Company's executives (and CEO), the annual cash incentive during the
years 1998, 1999 and 2000 ranged from 11.4% to 112.0% of base salary. For the
Bank's named executives, the annual cash incentive ranged from 18.2% to 20.5% of
base salary. For GLL's named executive, the annual cash incentive ranged from
11.4% to 112.0% of base salary. For the Bank and GLL, this means that up to
approximately 20.5% and 112.0%, respectively, of executive annual compensation
was variable, could fluctuate significantly from year to year, and was directly
and indirectly tied to business and individual performance. For the Company's
CEO, the percentage of annual cash incentive for 2000 was 18.2% of base salary.
The annual cash incentive for the Bank's named executives is based on the Bank's
return on assets (ROA). The Bank's Board of Directors, in its discretion, sets
the threshold ROA target, based in part on the Bank's financial performance in
prior years and the performance of banking organizations of similar size in the
Bank's general geographic region. If the threshold ROA target is achieved, a
stated dollar amount will be paid into an incentive compensation pool. The
incentive compensation pool amounts are then distributed among incentive plan
participants based on such participants' base salaries as a percentage of all
participants' base salaries. If the Bank earns a ROA above the threshold level,
an increasing dollar incentive pool is created up to a maximum dollar amount at
a predetermined ROA level. The Company continued the incentive plan for GLL's
CEO that GLL had prior to the merger. The incentive plan for GLL's CEO is based
on a percentage of GLL's earnings before income taxes.
For the Company's CEO, executives (and other key employees), stock options may
be granted each year in the discretion of the Board of Directors. While no
formal system is employed in determining the number of stock options granted,
both in the aggregate and to any one individual, the Board does take into
account the Company's current financial performance and the number of stock
options previously granted.
Page 9
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This report is provided as a summary of current Board practice with regard to
annual compensation review and authorization of executive officer compensation
and with respect to specific action taken for the CEO.
Because executive officer and CEO salaries are not expected currently or in the
near future to exceed those limitations provided under Section 162(m) of the
Internal Revenue Code, the Board currently has no specific policy which
addresses the income tax deductibility of "qualifying compensation" under this
specific code section. However, the Company's 1997 Incentive Stock Option Plan
was designed to provide that compensation deductions, if any, available to the
Company with respect to remuneration under such plan are not subject to the
deduction limitations of Section 162(m).
BANK OF GRANITE CORPORATION
Compensation Committee of the Board of Directors
------------------------------------------------
John N. Bray, Chair
Paul M. Fleetwood, III, CPA
John A. Forlines, Jr.
Barbara F. Freiman
Hugh R. Gaither
Charles M. Snipes
Boyd C. Wilson, Jr., CPA
COMPENSATION COMMITTEE INTERLOCKS AND
INSIDER PARTICIPATION
The full Company Board of Directors serves as the Company's compensation
committee. John A. Forlines, Jr. and Charles M. Snipes both served as members of
the Company's and Bank's Board of Directors during 2000 and also served as
Company and Bank executive officers. Mr. Forlines is the Chairman and CEO of the
Company and Chairman of the Bank. Mr. Snipes is the President of the Company,
President and CEO of the Bank and Chairman of GLL. While Mr. Forlines and Mr.
Snipes specifically excluded themselves from any compensation committee
discussions concerning their own compensation, they did participate in
compensation committee discussions concerning the compensation of other
executive officers.
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PROPOSED 2001
INCENTIVE STOCK OPTION PLAN
(PROPOSAL 2)
The Board of Directors is submitting to the shareholders, for their approval,
the Company's 2001 Incentive stock Option Plan (the "2001 Plan"). The 2001 Plan
was adopted by the Company's Board of Directors (the "Board") and became
effective on January 8, 2001, subject to shareholder approval. The 2001 Plan is
similar in its terms and its purpose to the 1997 Incentive Stock Option Plan for
the Company, which was adopted by the Board of Directors and approved by the
shareholders in 1997. The Board believes that option plans have proved to be an
important means of attracting, retaining and motivating key employees.
REASON FOR SHAREHOLDER ADOPTION OF THE 2001 PLAN
The 2001 Plan is being submitted for consideration by the shareholders in order
to comply with Nasdaq rules and in order to qualify remuneration attributable to
option awards under the 2001 Plan to certain key executives as "performance
based" under Section 162(m) of the Internal Revenue Code of 1986 (the "Code"),
as amended. Section 162(m) of the Code generally limits to $1,000,000 the amount
of compensation a publicly-held corporation may deduct for compensation in any
year to any chief executive officer and up to four of such corporation's other
most highly compensated officers. Option awards under the 2001 Plan are intended
to quality as incentive stock options under Section 422 of the Code, for which
the corporation generally is not entitled to a deduction.
SUMMARY OF THE 2001 PLAN
The 2001 Plan is summarized below. However, this summary is qualified in its
entirety by reference to the text of the 2001 Plan, a copy of which may be
obtained without charge upon written request to Kirby A. Tyndall, Secretary,
Bank of Granite Corporation, P.O. Box 128, Granite Falls, North Carolina
28630-0128.
General. The 2001 Plan provides that the Company may grant options to purchase
Common Stock ("Options") to key employees of the Company and its subsidiaries.
The purpose of the 2001 Plan is to promote the growth and profitability of the
Company by increasing personal participation of officers and other key employees
in the financial performance of the Company, by enabling the Company to attract
and retain officers and employees of outstanding competence and by providing
such officers and employees with an equity opportunity in the Company.
The 2001 Plan provides that Options may be granted in such amounts and at such
time as the Compensation Committee of the Board of Directors shall determine.
The 2001 Plan provides that the maximum amount of shares of Common Stock
available for issuance pursuant to Options granted under the 2001 Plan is
200,000. Any shares of Common Stock related to Options which terminate by
expiration, forfeiture or cancellation shall be available again for grant under
the 2001 Plan. No employee may be granted under the Plan in any calendar year
Options to purchase more than 5,000 shares of Common Stock. The numbers of
shares subject to Options that may be granted under the 2001 Plan and the number
of shares and exercise prices of outstanding Options shall be adjusted to
reflect any change in the capitalization of the Company as contemplated in the
2001 Plan. No Options may be granted under the 2001 Plan after January 8, 2011.
Administration. The 2001 Plan shall be administered by the Compensation
Committee of the Company's Board of Directors or other committee of the Board
designated by the Board (the "Compensation Committee"). The Compensation
Committee shall be composed solely of members who are "non-employee directors"
within the meaning of Rule 16b-3 under the Securities Exchange Act of 1934 (the
"Exchange Act") and "outside directors" within the meaning of regulations
adopted pursuant to Section 162(m) of the Code. The Compensation Committee shall
have complete authority to control, operate, manage and administer the 2001
Plan. Subject to the terms of the 2001 Plan, such authority shall include, but
not limited to, the right to (a) determine the employees who will receive
Options, the timing of the grants and vesting of Options, and other terms of
such Options, (b) make and amend rules governing the administration of the 2001
Plan, (c) construe and interpret the 2001 Plan, (d) take actions necessary
maintain the 2001 Plan's compliance with securities, tax and other laws, and (e)
to make other necessary determinations in connection with the administration of
the 2001 Plan.
Page 11
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The Compensation Committee may designate selected Compensation Committee members
or certain employees of the Company to assist the Board or Compensation
Committee in the administration of the 2001 Plan and may grant authority to such
persons to execute documents, including Options, on behalf of the Compensation
Committee, subject to the requirements of the Section 16 rules under the
Exchange Act and Section 162(m) under the Code. The 2001 Plan provides that no
member of the Compensation Committee or employee of the Company assisting the
Board or Compensation Committee in connection with the 2001 Plan shall be liable
for any action taken or determination made in good faith.
Eligibility and Criteria for Grants. The 2001 Plan provides that Options may be
granted only to employees of the Company or its subsidiaries who are designated
as "Key Employees," which means an employee who holds a position of
responsibility in a managerial, administrative, or professional capacity. As of
March 5, 2001, there were approximately 62 such Key Employees eligible to
receive Options. In determining the Key Employees to whom Options shall be
granted under the 2001 Plan and the number of shares to be subject thereto, the
Compensation Committee may take into account the level and responsibility of the
employee's position, the level of the employee's performance, the employee's
level of compensation, the assessed potential of the employee and such
additional factors as the Compensation Committee may deem relevant to the
accomplishment of the purposes of the 2001 Plan.
Exercise Price. The price per share at which an Option may be exercised is
determined by the Compensation Committee at the time of grant, but the exercise
price per share may not be less than 100% of the fair market value of the
Company's Common Stock on the date of grant.
Method of Exercise. Payment of the exercise price must be in cash. Options
granted under the 2001 Plan may be exercised for any lesser number of shares
than the full amount for which it could be exercised. Such a partial exercise of
an Option does not affect the right to exercise the Option for the remaining
shares subject to the Option.
Term of Options. The 2001 Plan generally provides that Options are exercisable
at such time and upon such conditions as may be determined by the Compensation
Committee at the time of the grant, except that the term of such Options may not
exceed ten years from the date of the grant. In no event may an Option be
exercised after the expiration of its fixed term. Stock Option Awards are
intended to comply with Section 422 of the Code. The 2001 Plan prohibits
repricing of outstanding Options.
Transferability of Options. In general, Options granted under the 2001 Plan may
not be transferred other than by will or the laws of descent and distribution
and during the optionee's lifetime may be exercised only by the optionee.
Termination of Employment. In general, outstanding Options terminate within one
year of the termination of an Employee's employment because of death or
disability and within 90 days of termination for any other reason, except that
Options terminate immediately upon termination for cause. If an Employee dies
without having exercised an Option, the Option may be exercised by the
Employee's estate or by a person who acquired the right to exercise the Option
by bequest or inheritance, to the extent of the shares with respect to which the
option could have been exercised on the date of the Employee's death. The 2001
Plan also provides that Options granted thereunder will be forfeited if the
holder of such Options engages in competition with the Company without the
consent of the Company.
Change in Control Provisions. The 2001 Plan provides that, upon the occurrence
of certain Change in Control Events (as defined below), all outstanding options
become immediately vested and converted into the right to receive a cash lump
sum payment (the "Cash-Out Payment") equal to the number of options converted
times the highest closing price per share paid for the Common Stock during the
90 day period ending on the date of the Change in Control Event.
Such Cash-Out Payment will be triggered upon the earlier to occur of the
following: (1) a Change in Control Event which results, directly or indirectly,
in the Common Stock ceasing to be actively traded on the primary securities
exchange or quotation system on which the Common Stock was traded immediately
prior to such Change in Control Event; or (2) the termination of an optionee's
employment within two years following a Change in Control Event for reasons
other than cause (as defined in the 2001 Plan). Any of the following constitutes
a Change in Control Event: (1) the consummation of any tender offer resulting in
the transfer of ownership of 50% or more of the voting power of the Company's
then-outstanding voting securities; (2) the merger or consolidation of the
Company with another corporation that results in less than 50% of the voting
power of the surviving corporation being owned in the aggregate by the Company's
former shareholders other than affiliates of any party to the merger or
consolidation; (3) the Company transfers all or substantially all its assets to
another entity that is not a wholly-owned subsidiary of the Company; (4) any
party becomes the beneficial owner of 50% or more of the combined voting power
of the Company's then-outstanding voting securities; and (5) any
Page 12
16
tender offer, merger, consolidation, sale of assets, contested election, or
combination of such transactions that results in a turnover of a majority of the
Company's Board of Directors. Any Cash-Out Payment triggered by the foregoing
provisions is payable no later than 90 days after the triggering event.
Amendment of Plan and Options. Subject to the provisions of the 2001 Plan, the
2001 Plan may be amended, altered or discontinued by the Compensation Committee
at any time, but no such termination or amendment shall materially and adversely
affect the rights and obligations of a holder of an Option theretofore granted
without such holder's consent. The Compensation Committee may also amend the
terms and conditions of any outstanding Option. However, no action may be taken
that would alter or impair any rights or obligations under any outstanding
Option without the consent of the holder of the Option.
Federal Income Tax Consequences. Certain tax consequences of the 2001 Plan under
current federal law are summarized in the following discussion, which deals with
the general tax principles applicable to the 2001 Plan, and is intended for
general information only. Alternative minimum tax and state and local income
taxes are not discussed, and may vary depending on individual circumstances and
from locality to locality.
Options granted under the 2001 Plan are intended to qualify as "incentive stock
options" under Section 422 of the Code. A participant who is granted an Option
generally will not be subject to federal income tax at the time of grant, and
the Company generally will not be entitled to a tax deduction by reason of such
grant. Upon exercise of an Option, no taxable income will be recognized by the
participant, and the Company will not be entitled to a tax deduction by reason
of such exercise. However, if shares purchased pursuant to the exercise of an
Option are sold within two years from the date of grant or within one year after
the transfer of such shares to the participant, the difference, with certain
adjustments, between the fair market value of the shares at the date of exercise
and the exercise price will be considered ordinary income, and the Company will
be entitled to a tax deduction at the same time and in the same amount. In the
event of a sale of shares purchased upon exercise of an Option, any appreciation
above or depreciation below the fair market value at the date of exercise will
generally qualify as capital gain or loss. In addition, to the extent the
aggregate fair market value (determined at the time Options were granted) of the
Common Stock with respect to which stock options are exercisable for the first
time by the participant during any calendar year exceeds $100,000, such excess
Options shall be treated as non-qualified options, and with respect to such
non-qualified options exercised, the participant will recognize ordinary income
equal to the fair market value of the stock received as of the date of exercise
less the option price paid, and the Company will be entitled to a deduction of
the same amount. The 2001 plan is intended to operate in a manner such that it
will not subject any such deduction to the $1,000,000 deduction limitation
imposed by Section 162(m) of the Code.
Effective Date; Duration. As noted above, the 2001 Plan became effective on
January 8, 2001; provided that no Option granted under the 2001 Plan will become
exercisable or payable until the 2001 Plan has been approved by the holders of a
majority of the outstanding shares of Common Stock. If approved and unless the
2001 Plan is previously terminated by the Board or Compensation Committee, no
Options may be granted under the 2001 Plan after January 8, 2011.
At March 5, 2001, options for 200,000 shares are available for grant under the
2001 Plan. On March 5, 2001, the closing price for the Company's Common Stock as
reported by Nasdaq, was $19.94 per share.
FOR THE REASONS SET FORTH ABOVE, THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A
VOTE FOR PROPOSAL 2 TO ADOPT OF THE 2001 INCENTIVE STOCK OPTION PLAN.
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SHAREHOLDER PERFORMANCE GRAPH
The performance graph shown on the following pages compares the Company's
cumulative total return over the most recent five year period with both the
Nasdaq Total Return Index and an Independent Bank Index (reflecting changes in
certain peer group bank stocks). The Independent Bank Index, purchased from The
Carson Medlin Company, Tampa, Florida, reflects the total return to shareholders
of a group of 22 independent publicly owned community banks located in the
southeastern states of Alabama, Florida, Georgia, North Carolina, South
Carolina, Tennessee, Virginia and West Virginia. The banks range in asset size
from $195 million to $1.5 billion. Returns are shown on a total return basis
which assumes the reinvestment of dividends. Due to the trend of mergers and
consolidation in the banking industry, the investment banking firm changes the
composition of the Independent Bank Index from year to year to replace community
banks that have been acquired or otherwise changed their structure in such a way
as to make them unrepresentative of the community banks represented in the
Index. The following list contains the institutions included in the 2000
Independent Bank Index.
Assets
Name, City, State ($ in millions)
United Security Bancshares, Inc., Thomasville, AL $ 496
TIB Financial Corporation, Key Largo, FL 413
Seacoast Banking Corporation, Stuart, FL 1,104
Capital City Bank Group, Inc., Tallahassee, FL 1,492
Fidelity National Corporation, Atlanta, GA 947
Southwest Georgia Financial Group, Moultrie, GA 241
PAB Bankshares, Inc., Valdosta, GA 735
Four Oaks Fincorp, Inc., Four Oaks, NC 254
FNB Financial Services Corporation, Reidsville, NC 666
First Bancorp, Troy, NC 929
CNB Corporation, Conway, SC 466
Palmetto Bancshares, Inc., Laurens, SC 657
First Pulaski National Corporation, Pulaski, TN 341
Community Financial Group, Inc., Nashville, TN 291
National Bankshares, Inc., Blackburg, VA 499
FNB Corporation, Christiansburg, VA 523
Virginia Commonwealth Financial Corporation, Culpeper, VA 453
Americal National Bankshares, Inc., Danville, VA 541
Central Virginia Bankshares, Inc., Powhatan, VA 195
Virginia Financial Corporation, Staunton, VA 491
C&F Financial Corporation, West Point, VA 354
First Century Bankshares Inc., Bluefield, WV 378
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BANK OF GRANITE CORPORATION
FIVE YEAR PERFORMANCE INDEX
[Five Year Stock Performance Chart presented here]
1995 1996 1997 1998 1999 2000
----- ----- ----- ----- ----- ----
Bank of Granite Corporation 100 152 163 186 147 162
Independent Bank Index 100 128 193 204 185 191
Nasdaq Total Return Index 100 123 151 213 395 238
The average compound annual returns for the five-year period ended December 31,
2000 were 10.1% for the Company, 13.8% for the Independent Bank Index and 18.9%
for the Nasdaq Total Return Index. Returns by year for the Company and the two
indices are presented below.
1996 1997 1998 1999 2000
----- ----- ----- ----- ----
Bank of Granite Corporation 52.0% 7.2% 14.1% -21.0% 10.2%
Independent Bank Index 28.0% 50.8% 5.7% -9.3% 3.2%
Nasdaq Total Return Index 23.0% 22.8% 41.1% 85.4% -39.7%
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TRANSACTIONS WITH OFFICERS AND DIRECTORS
The Company has had, and expects to have in the future, banking transactions in
the ordinary course of its business with directors, officers and their
associates, on the same terms, including interest rates and collateral on loans,
as those prevailing at the same time for comparable transactions with others;
and, in the opinion of Company management, these transactions do not and will
not involve more than the normal risk of collectibility or present other
unfavorable features.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and executive officers, and persons who own more than 10% of the
Company's Common Stock, to file with the Securities and Exchange Commission
initial reports of ownership of Company Common Stock and reports of changes in
ownership. Executive officer, directors and greater than 10% shareholders are
required by SEC regulations to furnish the Company with copies of all Section
16(a) forms they file.
Based on a review of the Section 16(a) reports furnished to the Company, all
Section 16(a) filings required of its directors and executive officers for 2000
were made, to the Company's knowledge and belief, in a timely manner.
RATIFICATION OF SELECTION OF ACCOUNTANTS
(PROPOSAL 3)
The Board of Directors of the Company has selected the firm of Deloitte & Touche
LLP as independent Certified Public Accountants to examine the financial
statements of the Company for the year ending December 31, 2001. The firm is to
report on the Company's consolidated balance sheets, and related consolidated
statements of income, comprehensive income, cash flows, and changes in
shareholders' equity, and to perform such other appropriate accounting services
as may be required by the Board of Directors. It is expected that
representatives of Deloitte & Touche LLP, who also served as the Company's
accounting firm for the past fiscal year, will be present at the shareholders'
meeting. They will be provided with any opportunity to make a statement if they
desire to do so and to answer appropriate questions which may be raised at the
meeting.
Principal Accounting Firm Fees
Audit Fees
The aggregate fees billed by Deloitte & Touche LLP, the member firms of Deloitte
Touche Tohmatsu, and their respective affiliates (collectively, "Deloitte") for
professional services rendered for the audit of the Company's annual
consolidated financial statements for the year ended December 31, 2000 and for
the reviews of the consolidated financial statements included in the Company
Quarterly Reports on Form 10-Q for the year were $84,300.
Financial Information Systems Design and Implementation Fees
There were no fees billed by Deloitte for professional services rendered for
information technology services relating to financial information systems design
and implementation for the year ended December 31, 2000.
All Other Fees
The aggregate fees billed by Deloitte for services rendered to the Company,
other than the services described above under "Audit Fees" and "Financial
Information Systems Design and Implementation Fees", for the year ended December
31, 2000 were $42,600.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE SHAREHOLDERS RATIFY THE
APPOINTMENT OF DELOITTE & TOUCHE LLP AS THE COMPANY'S INDEPENDENT CERTIFIED
PUBLIC ACCOUNTANTS FOR THE YEAR ENDING DECEMBER 31, 2001 BY VOTING FOR PROPOSAL
3.
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PROPOSALS FOR 2002 ANNUAL SHAREHOLDERS MEETING
From time to time, individual shareholders may wish to submit proposals which
they believe should be voted upon by the Company's shareholders. The Securities
and Exchange Commission has adopted regulations which govern the inclusion of
such proposals in the Company's annual proxy materials. No such proposals were
submitted for the 2001 Annual Meeting. Shareholder proposals intended to be
presented at the 2002 Annual Meeting of Shareholders must be received by the
Secretary of the Company at its executive office, 23 North Main Street, P.O. Box
128, Granite Falls, North Carolina 28630 no later than November 21, 2001 (which
is 120 days prior to the expected date of the 2002 Proxy Statement) in order to
be eligible for inclusion in the Company's Proxy Ballot and Proxy Statement for
the 2002 Annual Meeting.
While the Company's Nominating Committee normally recommends and nominates
individuals to serve as directors of the Company, shareholders may also nominate
candidates for director, provided that such nominations are made in writing and
are received by the Company at its executive offices not later than December 21,
2001 (which is 90 days prior to the expected date of the 2002 Proxy Statement).
The nomination should be sent to the attention of the Company Secretary and must
include, concerning the director nominee, the following information: full name,
age, date of birth, educational background and business experience, including
positions held for at least the preceding five years. The nomination must also
include home and business addresses and telephone numbers and include a signed
representation by the nominee to timely provide all information requested by the
Company as part of its disclosure in regard to the solicitation of proxies for
the election of directors. The name of each such candidate for director must be
placed in nomination at the Annual Meeting by a shareholder present in person.
The nominee must also be present in person at the meeting. A vote for a person
who has not been duly nominated pursuant to these requirements is void.
OTHER BUSINESS
Management of the Company knows of no other business to be presented to the
meeting. If other matters should properly come before the Annual Meeting or any
adjournment thereof, a vote may be cast pursuant to the accompanying Proxy in
accordance with the judgment of the person or persons voting the same.
All shareholders are invited to attend the Annual Meeting of Shareholders on
April 23, 2001 at 10:30 a.m., at the Holiday Inn - Select, 1385 Lenoir Rhyne
Boulevard, S.E. (at Interstate 40, Exit #125), Hickory, North Carolina. At the
meeting you may vote your shares in person. Even if you plan to attend, however,
please sign and return your Proxy promptly. A Proxy may be revoked at any time
before it is voted, and the giving of a Proxy will not affect the right of a
shareholder to attend the meeting and vote in person.
By Order of the Board of Directors
BANK OF GRANITE CORPORATION
/s/ Kirby A. Tyndall
Granite Falls, North Carolina KIRBY A. TYNDALL
March 23, 2001 Secretary
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APPENDIX A
AUDIT COMMITTEE CHARTER
ROLE AND INDEPENDENCE
The Audit Committee (the "Audit Committee") of the Board of Directors (the
"Board") assists the Board in fulfilling its responsibility for oversight of the
quality and integrity of the accounting, auditing and reporting practices of
Bank of Granite Corporation and Subsidiaries (the "Corporation") and such other
duties as directed by the Board. The membership of the Audit Committee shall
consist of at least three directors who are generally knowledgeable in financial
and auditing matters, including at least one member with accounting or related
financial management expertise. Each member shall be free of any relationship
that, in the opinion of the Board, would interfere with his or her individual
exercise of independent judgement. The Audit Committee is expected to maintain
free and open communication (including private executive sessions at least
annually) with the independent accountants, the internal auditors and the
management of the Corporation. In discharging this oversight role, the Audit
Committee is empowered to investigate any matter brought to its attention, with
full power to retain outside counsel or other experts for this purpose. This
charter shall be reviewed, updated and approved annually by the Board.
RESPONSIBILITIES
The Audit Committee's primary responsibilities include:
o Primary input into the recommendation to the Board for the
selection and retention of the independent accountant that
audits the financial statements of the Corporation. In so
doing, the Audit Committee (i) will discuss and consider the
auditor's written affirmation that the auditor is in fact
independent, (ii) will discuss the nature and rigor of the
audit process, receive and review all reports and (iii) will
provide to the independent accountant full access to the Audit
Committee (and the Board) to report on any and all appropriate
matters.
o Provision of guidance and oversight to the internal audit
function of the Corporation including review of the
organization, plans and results of such activity.
o Review of financial statements (including quarterly reports)
with management and the independent auditor. It is anticipated
that these discussions will include quality of earnings,
review of reserves and accruals, consideration of the
suitability of accounting principles, review of highly
judgmental areas, review of audit adjustments whether or not
recorded and such other inquiries as may be appropriate.
Annually, after satisfactory review by the Audit Committee,
the Corporation's audited financial statements included in the
annual report on Form 10-K will be approved by the Board for
filing with the Securities and Exchange Commission.
o Discussion with management and the auditors of the quality and
adequacy of the Corporation's internal controls.
o Discussion with management of the status of pending
litigation, taxation matters and other areas of oversight to
the legal and compliance area as may be appropriate.
o Reporting on Audit Committee activities to the Board and
issuance annually of a summary report (including appropriate
oversight conclusions) suitable for submission to the
shareholders.
Approved by the Board of Directors: March 12, 2001 and May 8, 2000
Page 18
22
***** SAMPLE BALLOT *****
[X] PLEASE MARK VOTES REVOCABLE PROXY
AS IN THIS EXAMPLE BANK OF GRANITE CORPORATION
With- For All
THIS PROXY IS SOLICITED ON BEHALF OF THE For hold Except
BOARD OF DIRECTORS. 1. ELECTION OF DIRECTORS [_] [_] [_]
John N Bray
Paul M. Fleetwood, III, CPA
The undersigned hereby appoints John A. John A. Forlines, Jr.
Forlines, Jr., John N. Bray, and Barbara Barbara F. Freiman
F. Freiman, or each of them, as Proxies, Hugh R. Gaither
each with the power to appoint his or her Charles M. Snipes
substitute and hereby authorizes each of Boyd C. Wilson, Jr., CPA
them to represent and to vote as INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE
designated below all the shares of Common FOR ANY INDIVIDUAL NOMINEE, MARK "FOR ALL
Stock held on record by the undersigned EXCEPT" AND WRITE THAT NOMINEE'S NAME IN
on March 5, 2001, at the Annual Meeting THE SPACE PROVIDED BELOW.
of Shareholders to be held on April 23, _____________________________________________
2001, or any adjournment thereof. For Against Abstain
2. APPROVAL OF THE 2001 [_] [_] [_]
INCENTIVE STOCK OPTION PLAN
For Against Abstain
3. THE RATIFICATION OF [_] [_] [_]
THE ACCOUNTING FIRM DELOITTE
& TOUCHE LLP as the Corporation's
Independent Certified Public
Accountants for the year
ending December 31, 2001.
4. In their discretion, the Proxies
are authorized to vote upon
other such business as may properly
come before the meeting.
SHARES OF COMMON STOCK OF THE CORPORATION
Please be sure to sign and WILL BE VOTED AS SPECIFIED. IF NO
date this Proxy in the SPECIFICATION IS MADE, SHARES WILL BE VOTED
spaces below. Date FOR PROPOSAL 1 TO ELECT THE BOARD OF
__________________ DIRECTORS' NOMINEES TO THE BOARD OF
DIRECTORS, FOR PROPOSAL 2 TO APPROVE THE 2001
INCENTIVE STOCK OPTION PLAN AND FOR PROPOSAL
3 TO RATIFY THE ACCOUNTING FIRM OF DELOITTE &
_______________________ _______________________ TOUCHE, LLP AS THE CORPORATION'S AUDITORS,
Shareholder sign above Co-holder (if any) AND OTHERWISE AT THE DISCRETION OF THE
sign above PROXIES.
- -----------------------------------------------------------------------------------------------------
***Detach above card, sign, date and mail in postage paid envelope provided.***
BANK OF GRANITE CORPORATION
The above signed hereby acknowledges receipt of the Notice of Annual Meeting of
the Shareholders of the Corporation called for April 23, 2001, a Proxy Statement
for the Annual Meeting, the Annual Report on Form 10-K and the 2000 Annual
Report to Shareholders.
Please sign EXACTLY as your name(s) appear(s) on this proxy card. When shares
are held jointly, each holder should sign. When signing in a representative
capacity, please give title.
YOUR VOTE IS IMPORTANT TO US!
PLEASE ACT PROMPTLY
SIGN, DATE & MAIL YOUR PROXY CARD TODAY