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
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(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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(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the
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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.
(1) Amount Previously Paid:
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BANK OF GRANITE
--CORPORATION--
23 NORTH MAIN STREET
GRANITE FALLS, NORTH CAROLINA 28630
(704) 496-2000
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS - APRIL 22, 2002
TO OUR SHAREHOLDERS:
The Annual Meeting of Shareholders of Bank of Granite Corporation will be held
on Monday, April 22, 2002 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 22,
2002, which accompanies the Notice;
2. 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, 2002; and
3. 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 4, 2002 are
entitled to receive notice of, and to vote at, this meeting.
Bank of Granite Corporation's 2002 Annual Shareholders Meeting proxy Ballot,
Proxy Statement and its 2001 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 22, 2002 Chairman and Chief Executive Officer
[Map to Annual Meeting location presented here]
BANK OF GRANITE
--CORPORATION--
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PROXY STATEMENT
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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 22, 2002, 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 22, 2002.
A copy of the Company's 2001 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 4, 2002. The Company
will also provide to any shareholder, without charge, a copy of the Annual
Report for 2001 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 4, 2002, the record date, the Company had
10,935,675 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 4, 2002 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.
Under Proposal 1 (the Election of Directors), the directors are elected by
plurality. The approval of Proposal 2 (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 4, 2002.
Cumulative voting is not permitted, and shareholders do not have dissenters
rights with respect to any of the matters to be considered.
1
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
and 2. Each Proxy, unless the shareholder otherwise specifies, will be voted in
favor of Proposals 1 and 2. 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 and (2) 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.
On the record date, the Company's Common Stock was owned by approximately 5,190
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 Company 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, 2001, the Company's Board of
Directors held 13 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 $6,500 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
2001 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 2003 Annual Shareholders Meeting." During 2001, 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 2001, the Compensation Committee held 1
meetings.
2
AUDIT COMMITTEE - The Audit Committee is composed of directors Paul M.
Fleetwood, III, 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 2001, 4 meetings were held. All Audit Committee members attended more
than 75% of the total number of Audit Committee meetings held during the fiscal
year 2001.
AUDIT COMMITTEE REPORT AND CHARTER
AUDIT COMMITTEE REPORT
In accordance with its written charter 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 2001, the Audit Committee held 4 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. 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, 2001, 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, 2001, 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, Chair
Barbara F. Freiman
Boyd C. Wilson, Jr., CPA
3
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 4, 2002.
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 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, 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 Flagship Brands,
LLC, a hosiery distributor headquartered in Newton, North Carolina, where he
has served in such capacity since 2001. Prior to 2001, Mr. Gaither served as
President and Chief Executive Officer of Ridgeview, Inc., where he has served
in such capacity from 1975 to 2001. 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 of Finance and Administration 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.
4
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.
5
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 4, 2002. 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 Ownership
Director/Nominee Age on Amount and Nature as % of
or Nondirector Principle Occupation Dec. 31, Director of Beneficial Common
Executive Officer during last five years 2001 Since Ownership Stock
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DIRECTORS/NOMINEES
JOHN N. BRAY President, Vanguard 59 1992 4,086 direct (*)
Hickory, N.C. Furniture, Inc. 1,175 indirect(2)
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PAUL M. FLEETWOOD, III President, Corporate 54 1998 113,000 direct 1.03%
Hickory, N.C. Management Services, - indirect
Inc. and Catawba Valley
Building Supply, Inc.
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JOHN A. FORLINES, JR. Chairman and Chief 83 1954 (1) 540,242 direct 5.03%
Granite Falls, N.C. Executive Officer of the 10,000 indirect(3)
Company (since 1987);
Chairman of the Bank
(since 1972); (Chief
Executive Officer of
the Bank, 1954-94)
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BARBARA F. FREIMAN Fund Raising Consultant 67 1989 6,818 direct (*)
Lenoir, N.C. 2,340 indirect(2)
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HUGH R. GAITHER President and Chief 51 1997 216 direct (*)
Newton, N.C. Executive Officer, - indirect
Flagship Brands, LLC
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CHARLES M. SNIPES President of the 68 1982 (1) 134,912 direct 1.52%
Hickory, N.C. Company (since 1994); 21,250 indirect(2)
President and Chief 10,000 indirect(3)
Executive Officer of the
Bank (since 1994);
Chairman and Director
of GLL; Director of
Vanguard Furniture, Inc.
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BOYD C. WILSON, Vice President of Finance 49 1996 5,440 direct (*)
JR., CPA & Administration, Kincaid 5,947 indirect(2)
Hudson, N.C. Furniture Company
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NONDIRECTOR EXECUTIVE OFFICERS
KIRBY A. TYNDALL, CPA Secretary, Treasurer and 46 n/a 1,875 direct (*)
Hickory, N.C. Chief Financial Officer 6,800 indirect (3)
of the Company,
Bank and GLL;
Director of GLL
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GARY L. LACKEY Chief Executive Officer 51 n/a 1,500 direct (*)
Clemmons, N.C. and Director of GLL 1,350 indirect (3)
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Director/Nominees and Nondirector Executive Officers 808,089 direct 7.93%
as a Group (9 persons) 58,862 indirect (2,3)
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Notes: (*) Indicates beneficial ownership of less than 1%.
(1) The Company was organized as the holding company for the Bank
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 4, 2002.
6
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 2001.
Compensation
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Annual Long-term
----------------------------------------
Securities All Other
Name and Base Underlying Compen-
Principal Position Year Salary Bonus (1) Options (2) sation (3)
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JOHN A. FORLINES, JR 2001 $ 256,600 $ 54,240 5,000 $ 39,236
Company Chairman and Chief 2000 $ 249,100 $ 45,300 none $ 53,726
Executive Officer; Bank Chairman 1999 $ 235,000 $ 45,700 5,000 $ 42,859
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CHARLES M. SNIPES 2001 $ 204,800 $ 43,440 5,000 $ 80,649
Company President; 2000 $ 195,000 $ 36,200 none $ 47,716
Bank President and Chief Executive 1999 $ 187,500 $ 36,500 5,000 $ 37,429
Officer; GLL Chairman and Director
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KIRBY A. TYNDALL, CPA 2001 $ 106,000 $ 22,320 3,000 $ 13,504
Company, Bank and GLL 2000 $ 100,000 $ 18,500 none $ 18,821
Secretary, Treasurer and Chief 1999 $ 90,000 $ 17,800 3,000 $ 13,874
Financial Officer, GLL Director
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GARY L. LACKEY 2001 $ 120,000 $ 95,906 1,000 $ 13,250
GLL President and Chief Executive 2000 $ 120,000 $ 13,722 none $ 13,000
Officer, GLL Director 1999 $ 100,000 $ 60,316 1,000 $ 12,600
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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 $13,600 in 2001, $25,500 in 2000 and $19,200 in
1999; Mr. Snipes $13,600 in 2001, $25,500 in 2000 and $19,200
in 1999; Mr. Tyndall $9,960 in 2001, $17,670 in 2000 and
$12,936 in 1999; and Mr. Lackey $5,250 in 2001, $5,000 in 2000
and $4,600 in 1999.
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 $10,947 in 2001, $18,721 in 2000, and $15,039 in 1999; and
Mr. Snipes $5,680 in 2001, $9,225 in 2000 and $7,716 in 1999.
Figures shown further include amounts accrued by the Bank to the
indicated executive officer's Supplemental Executive Retirement
Plan for Bank officers ("Officers' SERP") benefit liability
accounts. During 2001, the Bank replaced its split-dollar life
insurance arrangements with its officers by adopting a non-tax
qualified Officers' SERP to supplement the benefit each officer can
receive under the Bank's tax-qualified profit sharing retirement
plan. Once the officer has completed 7 full years of service with
the Bank, the Officers' SERP is designed to provide a benefit to
the officer at the normal retirement age of 65, or thereafter, or
an early retirement age of 50. Benefits are payable for 10 years
for certain officers or life for certain officers. Actual
retirement benefits payable under the Officers' SERP are dependent
on an indexed retirement benefit formula, which accrues benefits
equal to the excess of the aggregate annual after-tax income from
informally associated life insurance contracts over the Bank's
opportunity costs related to the Officers' SERP. Because retirement
benefits payable under the Officers' SERP are
7
dependent on the performance of insurance contracts, the
performance of such contracts is not guaranteed by the Bank. In the
event of an officer's termination of employment for any reason,
other than for cause, the officer is 100% vested after 7 or more
full years of service with the Bank after the officer has attained
the age of 18. In the event of the officer's termination of
employment due to disability or change of control of the Company or
the Bank, payments from the plan would begin at the officer's
normal or early retirement age and the officer shall be 100% vested
in the entire retirement benefit amount. The following amounts were
accrued in 2001 to the indicated benefit liability accounts of the
named executive officers: Mr. Forlines $4,116; Mr. Snipes $49,121
and Mr. Tyndall $2,564.
In connection with the Officers' SERP, the Bank has also entered
into Life Insurance Endorsement Method Split Dollar Agreements (the
"Agreements") with the officers covered under the Officers' SERP.
Under the Agreements, in the event of the officer's death, the
officer's beneficiary will receive the lesser of 2 times the
officer's salary at the time of death or 100% of the net-at-risk
life insurance of the policy, which is defined as the death benefit
in excess of cash value, together with any remaining balance in the
liability reserve account.
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
2001, the value of life insurance premiums paid were $938 for Mr.
Forlines, $1,478 for Mr. Snipes and $180 for Mr. Tyndall. Also for
2001, the values for the personal use of vehicles were $535 for Mr.
Forlines, $870 for Mr. Snipes and $7,200 for Mr. Lackey. Director
fees for 2001 were $9,100 for Mr. Forlines, $9,900 for Mr. Snipes,
$800 for Mr. Tyndall and $800 for Mr. Lackey.
8
OPTION/SAR GRANTS IN LAST FISCAL YEAR
The following table sets forth information with respect to options or stock
appreciation rights ("SAR's") granted to the named executive officers during
2001.
Individual Grants Potential Realizable
Value at Assumed
Annual Rates of Stock
Price Appreciation
for Option Term
-----------------------------------------------------------------------------------
Number of % of Total
Securities Options Appreciation
Underlying Granted to Exercise or Assumed at
Name and Options Employees Base Price Expiration 5% 10%
Principal Position Granted(1) in 2001(2) ($/share)(3) Date(4) (5) (6)
- ---------------------------------------------------------------------------------------------------------------------------
JOHN A. FORLINES, JR. 5,000 23.8% $ 19.90 05/14/2006 $ 27,490 $ 60,746
Company Chairman and Chief
Executive Officer; Bank Chairman
- ---------------------------------------------------------------------------------------------------------------------------
CHARLES M. SNIPES 5,000 23.8% $ 19.90 05/14/2006 $ 27,490 $ 60,746
Company President;
Bank President and Chief Executive
Officer; GLL Chairman and Director
- ---------------------------------------------------------------------------------------------------------------------------
KIRBY A. TYNDALL, CPA 3,000 14.3% $ 19.90 05/14/2006 $ 16,494 $ 36,447
Company, Bank and GLL
Secretary, Treasurer and Chief
Financial Officer, GLL Director
- ---------------------------------------------------------------------------------------------------------------------------
GARY L. LACKEY 1,000 4.8% $ 19.90 05/14/2006 $ 5,498 $ 12,149
GLL President and Chief Executive
Officer, GLL Director
- ---------------------------------------------------------------------------------------------------------------------------
Notes: (1) Figures indicate number of shares of stock with respect to which
options were granted under the Plan to the indicated executive
officer during 2001. The price at which shares of Company Common
Stock may be purchased upon the exercise of options under the Plan
is equal to 100% of the fair market value of the Company's Common
Stock on the date the options are granted. All options granted
pursuant to the Plan must be exercised within 5 years from the date
of grant. Outstanding options must also be exercised during
employment or within 3 months after a participating executive's
termination of service. If termination of service is by reason of
death, an option my be exercised by the executive's legal
representative or beneficiary within one year after the date of
death. Options granted under the plan are subject to applicable
income tax withholding requirements and are not transferable by the
holder except by will or by the laws of descent and distribution,
and shall be exercisable, during the participating key executive's
lifetime, only by the key employee.
(2) Percent shown indicates options awarded to indicated executive
officer as a percentage of total options granted to all Plan
participants during 2001.
(3) The exercise or base price is the dollar amount at which each
share of stock subject to option may be acquired by the
indicated executive officer. The exercise or base price is the
closing market price per share of the Common Stock on the date
of the award of the option.
(4) The date shown indicates the date upon which the options
granted will expire.
(5) The dollar values shown represent the potential realizable
value of the grant of options at an assumed 5.0% annualized
appreciation rate in the price of Company Common Stock. The
potential realizable value is calculated under the following
formula: [(A x B) - A] x C, where A = $19.90, the exercise
price per share (which equals the market price at the time of
the grant), B = 1.2763, the assumed rate of stock price
appreciation (5%) compounded annually over the five-year term
of the option; and C = the number of securities underlying the
grant at year end 2001.
(6) The dollar values shown represent the potential realizable
value of the grant of options at an assumed 10% annualized
appreciation rate in the price of Company Common Stock. The
potential realizable value is calculated under the following
formula: [(A x B) - A] x C, where A = $19.90, the exercise price
per share (which equals the market price at the time of the grant),
B = 1.6105, the assumed rate of stock price appreciation (10%)
compounded annually over the five-year term of the option; and C =
the number of securities underlying the grant at year end 2001.
9
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 2001 and unexercised options held as of
December 31, 2001.
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. 3,375 $ 13,210 Exercisable 10,000 Exercisable none
Company Chairman and Chief Unexercisable 8,750 Unexercisable none
Executive Officer; Bank Chairman
- ---------------------------------------------------------------------------------------------------------------------------------
CHARLES M. SNIPES 3,375 $ 12,113 Exercisable 10,000 Exercisable none
Company President; Unexercisable 8,750 Unexercisable none
Bank President and Chief Executive
Officer; GLL Chairman and Director
- ---------------------------------------------------------------------------------------------------------------------------------
KIRBY A. TYNDALL, CPA -- $ -- Exercisable 6,800 Exercisable none
Company, Bank and GLL Unexercisable 5,450 Unexercisable none
Secretary, Treasurer and Chief
Financial Officer, GLL Director
- ---------------------------------------------------------------------------------------------------------------------------------
GARY L. LACKEY -- $ -- Exercisable 1,350 Exercisable none
GLL President and Chief Executive Unexercisable 1,900 Unexercisable none
Officer, GLL Director
- ---------------------------------------------------------------------------------------------------------------------------------
Notes: (1) Indicates number of shares acquired by indicated executive officer
through the exercise of options during 2001.
(2) Dollar amounts represent the aggregate dollar value realized by the
indicated executive officer upon the exercise of options during
2001. 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 2001. 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 2001. For those options
"in the money", value is computed based on the difference between
fair market value of Company Common Stock at year end 2001 and the
exercise or base price of the shares subject to the options. The
value of options exercisable and unexercisable at year end 2001 is
also shown.
10
CHANGE-OF-CONTROL AGREEMENTS AND EMPLOYMENT CONTRACTS
CHANGE-OF-CONTROL AGREEMENTS WITH NAMED EXECUTIVE OFFICERS
On January 1, 2002, Messrs. Forlines, Snipes and Tyndall each entered into a
Change of Control Agreement with the Company and the Bank. Each agreement
provides that in the event of a termination of the officer's employment in
connection with, or within 36 months after, a change of control of the Company
or the Bank, for reasons other than cause, the officer shall receive an amount
equal to three times (i) his then current salary plus (ii) the average of the
cash bonus paid to the officer by the Bank under the Bank's cash bonus incentive
plan during the immediately preceding three years. Further, in such event, the
officer shall continue to receive for a period of three years after his
termination all benefits the officer was receiving and entitled to on his
termination date, or the officer may elect to receive the dollar equivalent of
such benefits. The officer may elect to receive all such payments either in one
lump sum or in 36 equal monthly payments. In addition, the officer may terminate
the agreement upon a change of control of the Company or the Bank if, within 36
months of such change of control, the officer is assigned duties inconsistent
with his duties at the time of the change of control, the officer's annual base
salary is reduced below the amount in effect prior to the change of control, the
officer's benefits are reduced below the level prior to the change of control
(unless benefits are reduced for all employees), or the officer is transferred
to a location more than 50 miles from the officer's current principal work
location. Each agreement further provides that, unless terminated by the Company
or the Bank, notice of which must be given at least 13 months prior to the next
anniversary date, the term automatically is extended for an additional three
years on the same terms and conditions set forth in the agreement. Mr. Lackey
had not entered into a Change of Control Agreement with the Company, because he
entered into an Employment and Noncompetition Agreement with the Company, as is
discussed below.
EMPLOYMENT AND NONCOMPETITION AGREEMENT WITH GLL'S CHIEF EXECUTIVE OFFICER
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.
11
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 2001, the Compensation Committee increased the CEO's base salary by 3.0%.
The Compensation Committee determined that the 3.0% 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 2.45% return on assets placed the Company among
the banking industry's top performers during 2000.
For the Company's executives (and CEO), the annual cash incentive during the
years 1999, 2000 and 2001 ranged from 11.4% to 79.9% of base salary. For the
Bank's named executives, the annual cash incentive ranged from 18.2% to 21.2% of
base salary. For GLL's named executive, the annual cash incentive ranged from
11.4% to 79.9% of base salary. For the Bank and GLL, this means that up to
approximately 21.2% and 79.9%, 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 2001 was 21.1% 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.
12
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
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 2001 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.
13
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 the Nasdaq
Total Return Index, the SNL Index of banks with assets of $500 million to $1
billion and an Independent Bank Index (reflecting changes in certain peer group
bank stocks). The Company is in the process of changing its industry peer
comparison to the SNL Index of banks with assets of $500 million to $1 billion
from the Independent Bank Index constructed from publicly owned community banks
in the southeastern United States. The Company believes that the SNL Index of
banks with assets of $500 million to $1 billion more accurately reflects the
Company's peer performance than the Independent Bank Index used in previous
years. All of the stock performance data was independently prepared by SNL
Financial LC of Charlottesville, Virginia.
The Independent Bank Index reflects the total return to shareholders of a group
of 20 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 $235 million to
$1.8 billion. Returns are shown on a total return basis which assumes the
reinvestment of dividends. Due to the trend of mergers and consolidation in the
banking industry, the composition of the Independent Bank Index is changed from
year to year to replace community banks that have been acquired or otherwise
changed their structure in such a way as to make them unrepresentative of the
community banks represented in the Index. The following list contains the
institutions included in the 2001 Independent Bank Index.
Assets
Name, City, State ($ in millions)
United Security Bancshares, Inc., Thomasville, AL $ 523
TIB Financial Corporation, Key Largo, FL 472
Seacoast Banking Corporation, Stuart, FL 1,226
Capital City Bank Group, Inc., Tallahassee, FL 1,821
Fidelity National Corporation, Atlanta, GA 994
Southwest Georgia Financial Group, Moultrie, GA 235
PAB Bankshares, Inc., Valdosta, GA 864
Four Oaks Fincorp, Inc., Four Oaks, NC 300
FNB Financial Services Corporation, Reidsville, NC 705
First Bancorp, Troy, NC 1,145
CNB Corporation, Conway, SC 612
Community Financial Group, Inc., Nashville, TN 482
National Bankshares, Inc., Blackburg, VA 645
FNB Corporation, Christiansburg, VA 954
Virginia Commonwealth Financial Corporation, Culpeper, VA 505
Americal National Bankshares, Inc., Danville, VA 573
Central Virginia Bankshares, Inc., Powhatan, VA 250
Virginia Financial Corporation, Staunton, VA 536
C&F Financial Corporation, West Point, VA 404
First Century Bankshares Inc., Bluefield, WV 369
14
BANK OF GRANITE CORPORATION
Five Year Performance Index
[Chart of Five Year Stock Performance presented here]
1996 1997 1998 1999 2000 2001
---- ---- ---- ---- ---- ----
Bank of Granite Corporation 100 107 122 96 106 92
SNL $500M-$1B Bank Asset-Size Index 100 163 160 148 142 184
Nasdaq Composite Total Return Index(*) 100 122 173 321 193 153
Independent Bank Index 100 132 136 120 110 140
(C) 2002 SNL Financial LC, Charlottesville, Virginia
*Source: CRSP, Center for Research in Security Prices, Graduate School of
Business, The University of Chicago 2002
The average compound annual returns for the five-year period ended December 31,
2001 were -1.7% for the Company, 13.0% for the SNL $500M-$1B Bank Asset-Size
Index, 8.9% for the Nasdaq Composite Total Return Index and 7.0% for the
Independent Bank Index. Returns by year for the Company and the three indices
are presented below.
1997 1998 1999 2000 2001
---- ---- ---- ----- -----
Bank of Granite Corporation 7.0% 14.0% -21.3% 10.4% -13.2%
SNL $500M-$1B Bank Asset-Size Index 63.0% -1.8% -7.5% -4.1% 29.6%
Nasdaq Composite Total Return Index 22.0% 41.8% 85.5% -39.9% -20.7%
Independent Bank Index 32.0% 3.0% -11.8% -8.3% 27.3%
15
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 2001
were made, to the Company's knowledge and belief, in a timely manner.
RATIFICATION OF SELECTION OF ACCOUNTANTS
(Proposal 2)
The Board of Directors of the Company has selected the firm of Deloitte & Touche
LLP as independent Certified Public Accountants to audit the consolidated
financial statements of the Company for the year ending December 31, 2002. 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, 2001 and for
the reviews of the consolidated financial statements included in the Company
Quarterly Reports on Form 10-Q for the year were $89,250.
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, 2001.
All Other Fees
For the year ended December 31, 2001, the aggregate fees billed by Deloitte for
services rendered to the Company were $47,975, including audit related services
of $35,975 and tax compliance services of $12,000. Audit related services
generally include fees for other attest services for certain subsidiary
companies and work on SEC registration statements.
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, 2002 by voting FOR Proposal
2.
16
PROPOSALS FOR 2003 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 2002 Annual Meeting. Shareholder proposals intended to be
presented at the 2003 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 27, 2002 (which
is 120 days prior to the expected date of the 2003 Proxy Statement) in order to
be eligible for inclusion in the Company's Proxy Ballot and Proxy Statement for
the 2003 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 27,
2002 (which is 90 days prior to the expected date of the 2003 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 22, 2002 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 22, 2002 Secretary
17
(*****) SAMPLE BALLOT (*****)
[X] PLEASE MARK VOTES EVOCABLE PROXY
AS IN THIS EXAMPLE BANK OF GRANITE CORPORATION
<Table>
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
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 4, 2002, at the Annual Meeting THE SPACE PROVIDED BELOW.
of Shareholders to be held on April 22,
2002, or any adjournment thereof. --------------------------------------------------
For Against Abstain
2. THE RATIFICATION OF [_] [_] [_]
THE ACCOUNTING FIRM DELOITTE &
TOUCHE LLP as the Corporation's Independent Certified Public
Accountants for the year ending December 31, 2002.
3. 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 RATIFY THE
ACCOUNTING FIRM OF DELOITTE & TOUCHE, LLP AS
THE CORPORATION'S AUDITORS, AND OTHERWISE AT
- ---------------------------------------------- THE DISCRETION OF THE PROXIES.
Shareholder sign above Co-holder (if any)
sign above
</Table>
- --------------------------------------------------------------------------------
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 22, 2002, a Proxy Statement
for the Annual Meeting, the Annual Report on Form 10-K and the 2001 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