<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
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
|X| Definitive proxy statement
|_| Definitive additional materials
Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
LSB BANCSHARES, INC.
------------------------------------------------
(Name of Registrant as Specified in Its Charter)
LSB BANCSHARES, INC.
------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of filing fee (Check the appropriate box):
|X| No fee required.
|_| $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
|_| 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:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transactions applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11:
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
|_| 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:
- --------------------------------------------------------------------------------
(2) Form, schedule or registration statement no.:
- --------------------------------------------------------------------------------
(3) Filing party:
- --------------------------------------------------------------------------------
(4) Date filed:
<PAGE> 2
NOTICE OF ANNUAL MEETING OF THE SHAREHOLDERS OF
LSB BANCSHARES, INC.
ONE LSB PLAZA
LEXINGTON, NORTH CAROLINA 27292
To the Shareholders of LSB Bancshares, Inc.:
Notice is hereby given that the Annual Meeting of Shareholders of LSB
Bancshares, Inc. ("Bancshares"), called under authority of Article 2, Section 2,
of the Bylaws of Bancshares, will be held at the J. Smith Young YMCA, located at
119 West Third Avenue, Lexington, North Carolina 27292, on Wednesday, April 16,
1997 at 1:00 p.m. Shareholders of record at the close of business on March 3,
1997 are entitled to notice of and to vote at the meeting and any adjournment
thereof.
The purposes of the meeting are to consider and act upon the following
proposals:
- To elect four members of the Board of Directors;
- To ratify the appointment of Turlington and Company, Certified
Public Accountants, to conduct the independent audit for 1997;
- To consider and act upon a shareholder proposal by W. Robert
Koontz relating to minimum share ownership requirements for
directors of Bancshares; and
- To consider such other business as may properly come before
the meeting.
We urge you to attend this meeting. It is extremely important that your shares
be represented regardless of the number you own. Please sign and return your
proxy to Bancshares in the enclosed envelope at your earliest convenience.
Unless you indicate to the contrary, your proxy will be cast for you in favor of
the nominees for director named in the accompanying Proxy Statement, for the
ratification of the appointment of Turlington and Company to conduct the
independent audit for 1997, and against the shareholder proposal relating to
minimum share ownership requirements for directors of Bancshares, each as
described in more detail in the accompanying Proxy Statement.
This 14th day of March, 1997.
Yours very truly,
LSB BANCSHARES, INC.
Monty J. Oliver
Secretary
<PAGE> 3
LSB BANCSHARES, INC.
ONE LSB PLAZA
LEXINGTON, NORTH CAROLINA 27292
PROXY STATEMENT
The accompanying proxy is solicited by and on behalf of the Board of Directors
of LSB Bancshares, Inc. ("Bancshares") for use at the Annual Meeting of
Shareholders to be held on Wednesday, April 16, 1997 at 1:00 p.m. at the J.
Smith Young YMCA, located at 119 West Third Avenue, Lexington, North Carolina
27292, and at any adjournment thereof. The entire cost of such solicitation will
be borne by Bancshares. In addition, personal solicitation may be conducted by
directors, officers and employees of Bancshares and its subsidiary, Lexington
State Bank (the "Bank"). This Proxy Statement and the accompanying proxy card
were first mailed to shareholders on or about March 14, 1997.
The shares of Bancshares common stock (the "Common Stock") represented by the
accompanying proxy card will be voted at the meeting if the proxy card is
properly signed, dated and received by Bancshares prior to the time of the
meeting. Where a choice is specified on the proxy card as to the vote on any
matter to come before the meeting, the proxy will be voted in accordance with
such specification. If no choice is specified, the proxy will be voted in favor
of the nominees for director named herein, for the ratification of the
appointment of Turlington and Company to conduct the independent audit for 1997,
and against the shareholder proposal relating to minimum share ownership
requirements for directors of Bancshares. Any shareholder giving a proxy has the
right to revoke it at any time before it is voted by delivering a written
revocation or an executed proxy bearing a later date to the Secretary of
Bancshares or by attending and voting in person at the meeting. If a shareholder
is a participant in the Shareholder Dividend Reinvestment and Stock Purchase
Plan, the proxy represents the number of shares of Common Stock in the dividend
reinvestment account as well as shares held of record directly by the
shareholder.
VOTING PROCEDURES
Shareholders of record at the close of business on March 3, 1997 will be
entitled to vote at the Annual Meeting of Shareholders. At the close of business
on March 3, 1997, there were 5,403,539 shares of Common Stock outstanding and
entitled to vote. There is no other class of authorized stock. On all matters
considered at the meeting, shareholders are entitled to one vote for each share
held.
The laws of North Carolina, under which Bancshares is incorporated, provide
that, in connection with the election of directors, the persons receiving a
plurality of the votes cast will be elected as directors. The proposal to ratify
the appointment of Turlington and Company to conduct the independent audit of
Bancshares for 1997 and the proposal relating to minimum share ownership
requirements for directors will be approved if the number of votes cast "for"
each such proposal exceeds the number of votes cast "against" such proposal.
Shares held of record by a broker or its nominee ("Broker Shares") and
abstentions that are voted on any matter will be counted for purposes of
determining the existence of a quorum at the Annual Meeting. Broker Shares that
<PAGE> 4
are not voted on any matter at the Annual Meeting will not be included in
determining whether a quorum is present at the Annual Meeting. Abstentions and
Broker Shares that are not voted on a particular proposal will not be counted as
votes for or against such proposals and will have the same effect as negative
votes.
PROPOSAL 1: ELECTION OF DIRECTORS
Bancshares' Bylaws provide for a classified Board of Directors consisting of not
less than nine and not more than 24 directors, the number to be determined by
resolution of a majority of the Board of Directors or by resolution of the
shareholders at any meeting thereof. The Board of Directors, by resolution, has
set the number of directors at 12. The persons nominated by the Board of
Directors to serve as directors for a three-year term expiring at the 2000
Annual Meeting, as set forth below, were elected as directors at the 1994 Annual
Meeting. The persons named as proxies in the accompanying proxy card intend to
vote in favor of the nominees named below. Such nominees have consented to serve
as directors of Bancshares, if elected. If at the time of the meeting any of
such nominees are unable or unwilling to serve, the discretionary authority
provided in the accompanying proxy card will be exercised to vote for such other
person or persons for the office of director as may be nominated by the Board of
Directors. Proxies cannot be voted for a greater number of nominees than the
number named in this Proxy Statement.
The number of years of service on the Board of Directors indicated in the
following table includes service on the Board of Directors of the Bank prior to
the incorporation of Bancshares.
<TABLE>
<CAPTION>
NOMINEES FOR ELECTION AS DIRECTORS
TO SERVE UNTIL THE 2000 ANNUAL MEETING
==========================================================================================================================
DIRECTOR PRINCIPAL OCCUPATION
NAME AND AGE SINCE FOR PAST FIVE YEARS
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Margaret Lee W. Crowell (68) 1991 Retired since 1986; formerly Finance Officer of
Lexington City Schools
- --------------------------------------------------------------------------------------------------------------------------
Robert F. Lowe (54) 1983 Chairman, President and CEO of Bancshares, the Bank
and Peoples Finance Company of Lexington, Inc., a
subsidiary of the Bank; President and a director of LSB
Financial Services, Inc., a subsidiary of the Bank
- --------------------------------------------------------------------------------------------------------------------------
Robert E. Timberlake (60) 1979 Artist/Designer; President, Bob Timberlake Gallery,
Inc. (art gallery and distributorship); President, The
Land Company (real estate); Secretary/Treasurer, The
Bob Timberlake Collection (gallery, art, furniture and
accessories)
- --------------------------------------------------------------------------------------------------------------------------
Julius S. Young, Jr. (49) 1988 President, Jay Young Management, Inc.
==========================================================================================================================
</TABLE>
2
<PAGE> 5
<TABLE>
<CAPTION>
INCUMBENT DIRECTORS
SERVING UNTIL THE 1999 ANNUAL MEETING
==========================================================================================================================
DIRECTOR PRINCIPAL OCCUPATION
NAME AND AGE SINCE FOR PAST FIVE YEARS
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Leonard H. Beck (61) 1995 President, Green Printing Company; Director of The
National Association of Printers and Lithographers
- --------------------------------------------------------------------------------------------------------------------------
Samuel R. Harris (55) 1990 Physician; formerly Director and Treasurer, Lexington
Clinic for Women, P.A.
- --------------------------------------------------------------------------------------------------------------------------
David A. Smith (58) 1990 Owner, Red Acres Dairy Farm
- --------------------------------------------------------------------------------------------------------------------------
Burr W. Sullivan (50) 1987 President, Dorsett Printing and Lithographic
Corporation
==========================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
INCUMBENT DIRECTORS
SERVING UNTIL THE 1998 ANNUAL MEETING
==========================================================================================================================
DIRECTOR PRINCIPAL OCCUPATION
NAME AND AGE SINCE FOR PAST FIVE YEARS
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Michael S. Albert (42) 1995 President, CEO and Director of Billings Freight
Systems, Inc.; Treasurer of Cargo Carriers, Inc.;
Assistant Finance Manager of Metro Motor Express,
Inc.
- --------------------------------------------------------------------------------------------------------------------------
Peggy B. Barnhardt (63) 1995 Retired Deputy Superintendent, Davidson County Board
of Education; Director of the North Carolina
Association of School Administrators, Davidson
Medical Ministries and the Kiwanis Club of Lexington
- --------------------------------------------------------------------------------------------------------------------------
Walter A. Hill, Sr. (57) 1983 President, Hill Oil Company, Inc.; Vice President and
Secretary, NorthCo, Inc. (construction development)
- --------------------------------------------------------------------------------------------------------------------------
Robert B. Smith, Jr. (58) 1969 Attorney
==========================================================================================================================
</TABLE>
MANAGEMENT'S OWNERSHIP OF COMMON STOCK
The following table sets forth information concerning the beneficial ownership
of Common Stock by each director, nominee for director and each executive
officer named under the heading "Executive Compensation" herein, and by all
directors and executive officers as a group as of March 3, 1997. Management is
aware of no person who beneficially owns more than five percent of the
outstanding shares of Common Stock. According to rules promulgated by the
Securities and Exchange Commission (the "SEC"), a person is the "beneficial
owner" of securities if he or she has or shares the power to vote them or to
direct their investment, or has the right to acquire ownership of such
securities within 60 days through the exercise of an option, warrant, right of
conversion of a security or otherwise.
3
<PAGE> 6
<TABLE>
<CAPTION>
Amount and Nature of Beneficial Ownership of Common Stock
---------------------------------------------------------
Name of Sole Voting And Shared Voting And %
Beneficial Owner Investment Power Investment Power Total of Total
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Michael S. Albert 2,327 (1) 3,208 5,535 *
Peggy B. Barnhardt 1,208 (2) 1,208 *
Leonard H. Beck 2,175 (3) 2,175 *
Margaret Lee W. Crowell 5,674 (4) 9,811 15,485 *
Samuel R. Harris 2,775 (5) 2,775 *
Walter A. Hill, Sr. 8,902 (6) 6,367 15,269 *
Robert F. Lowe 58,803 (7) 32,667 91,470 1.7
David A. Smith 1,793 (8) 8,602 10,395 *
Robert B. Smith, Jr. 18,940 (9) 406 (10) 19,346 *
Burr W. Sullivan 2,478 (11) 2,091 4,569 *
Roberts E. Timberlake 7,828 (12) 13,963 (13) 21,791 *
Julius S. Young, Jr. 1,500 (14) 61,455 62,955 1.2
Monty J. Oliver 22,353 (15) 58 22,411 *
H. Franklin Sherron, Jr. 30,297 (16) 10,839 41,136 *
All directors and executive
officers as a group
(14 persons) 167,053 149,467 316,520 5.8
</TABLE>
- ----------------------------------
* An asterisk indicates less than one percent.
(1) Includes 1,000 shares subject to options exercisable on or before May
2, 1997.
(2) Includes 500 shares subject to options exercisable on or before May 2,
1997.
(3) Includes 500 shares subject to options exercisable on or before May 2,
1997.
(4) Includes 1,500 shares subject to options exercisable on or before May
2, 1997.
(5) Includes 1,500 shares subject to options exercisable on or before May
2, 1997.
(6) Includes 1,500 shares subject to options exercisable on or before May
2, 1997.
(7) Includes 31,251 shares subject to options exercisable on or before May
2, 1997.
(8) Includes 1,500 shares subject to options exercisable on or before May
2, 1997.
(9) Includes 1,500 shares subject to options exercisable on or before May
2, 1997.
(10) Includes 406 shares held by the Bank as agent for Mr. Robert B. Smith,
over which Mr. Smith shares investment power but has no voting power.
(11) Includes 1,500 shares subject to options exercisable on or before May
2, 1997.
(12) Includes 1,500 shares subject to options exercisable on or before May
2, 1997.
(13) Includes: (a) 2,942 shares held by the Bank as trustee of certain
trusts for the benefit of Mr. Timberlake's wife, over which Mr.
Timberlake shares investment power but has no voting power and (b)
2,581 shares held in trusts for Mr. Timberlake's benefit, over which
Mr. Timberlake shares investment power with the Bank as trustee and
over which the Bank has exclusive voting power.
(14) Represents 1,500 shares subject to options exercisable on or before May
2, 1997.
(15) Includes 12,500 shares subject to options exercisable on or before May
2, 1997.
(16) Includes 12,500 shares subject to options exercisable on or before May
2, 1997.
CORPORATE GOVERNANCE
The Board of Directors of Bancshares has standing Executive, Stock Option and
Compensation, and Audit Committees. There are no other committees of the Board
of Directors of Bancshares. The entire Board of Directors of Bancshares
nominates persons to serve as directors.
4
<PAGE> 7
The Executive Committee of Bancshares reviews various matters and submits
proposals or recommendations to Bancshares' Board of Directors. The Executive
Committee is empowered to and does act for Bancshares' Board of Directors on
certain matters. Members of the Executive Committee are Messrs. Lowe, David A.
Smith, Robert B. Smith, Jr., Sullivan and Young. Bancshares' Executive Committee
met two times during 1996.
The Stock Option and Compensation Committee administers the 1986 Employee
Incentive Stock Option Plan, the 1996 Stock Incentive Plan and the Management
Incentive Plan (the "Incentive Plan"). The Stock Option and Compensation
Committee selects key employees for participation in such plans and determines
the timing, pricing and amount of stock options granted and the amount of
incentive compensation earned pursuant to the plans within the terms of the
plans. The Stock Option and Compensation Committee is also responsible for
administering the 1994 Director Stock Option Plan. The Stock Option and
Compensation Committee, which met four times during 1996, is comprised of
Messrs. Albert, Robert B. Smith, Jr., Sullivan, Timberlake and Young and Mrs.
Crowell.
Messrs. Sullivan, Albert, Hill, Robert B. Smith, Jr. and Young are members of
Bancshares' Audit Committee. Bancshares' Audit Committee reviews and approves
various audit functions and is responsible for reviewing and approving the
Bank's internal audits and the separate examinations of the Bank by the Federal
Deposit Insurance Corporation and the North Carolina Commissioner of Banks.
Bancshares' Audit Committee met once during 1996.
The Board of Directors of the Bank has a standing Executive Committee. The
Executive Committee of the Bank reviews various matters and submits proposals or
recommendations to the Bank's Board of Directors. The Executive Committee is
empowered to and does act for the Bank's Board of Directors on certain matters.
The Bank's Executive Committee is comprised of Messrs. Lowe, David A. Smith,
Robert B. Smith, Jr., Sullivan and Young. During 1996, there were twenty-one
meetings of the Bank's Executive Committee.
During 1996, the Board of Directors of Bancshares met fourteen times and the
Board of Directors of the Bank met twelve times. All directors attended at least
75 percent of the aggregate of the total number of meetings of the Board of
Directors of Bancshares and the Bank (held during the period for which each
person was a director) and the total number of meetings held by all committees
of the Boards on which such directors served during 1996.
Shareholders entitled to vote in the election of directors may nominate
candidates for consideration by the Board of Directors of Bancshares. Pursuant
to the Bylaws of Bancshares, notice of nominations made by shareholders with
respect to the 1998 annual meeting must be received in writing by the Secretary
of Bancshares no earlier than December 29, 1997 and no later than January 23,
1998 and must set forth (i) the name, age, business address and, if known,
residence address of the nominee, (ii) the principal occupation or employment of
the nominee, (iii) the nominee's qualifications to serve as a director, (iv) the
number of shares of Common Stock beneficially owned by the nominee, (v) a
representation that the nominee has consented to his name being placed in
nomination, (vi) the name and record address of the shareholder
5
<PAGE> 8
making the nomination, (vii) the number of shares of Common Stock owned of
record and beneficially by such shareholder, and (viii) any material interest of
such shareholder in the proposed nomination.
EXECUTIVE COMPENSATION
The following table sets forth the total compensation awarded, paid to or earned
by the executive officers of Bancshares during each of the years ended December
31, 1996, December 31, 1995 and December 31, 1994:
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Annual Long-Term
Compensation Compensation
------------ ------------
Awards
Securities All Other
Name and Salary Bonus Underlying Compensation
Principal Position Year ($) ($) Options (#)(1) ($)(2)
------------------ ---- --- --- -------------- ------
<S> <C> <C> <C> <C> <C>
Robert F. Lowe 1996 175,000 47,819 10,000 11,963
President and CEO 1995 175,000 15,625 6,873
1994 167,800 15,625 3,632
Monty J. Oliver 1996 110,000 15,404 5,000 9,039
Secretary and Treasurer 1995 110,000 6,250 4,839
1994 106,000 6,250 2,385
H. Franklin Sherron, Jr. 1996 97,000 22,337 5,000 4,144
Vice President and 1995 97,000 6,250 3,354
Assistant Secretary 1994 91,000 6,250 2,047
</TABLE>
- ---------------------------------
(1) The information concerning options gives effect to the 25% stock split
in the form of a stock dividend paid on February 15, 1996.
(2) Compensation set forth in this column represents the following (i)
amounts contributed by the Bank for the account of the executive
officers under the Lexington State Bank Employees Savings Plus Plan for
each of 1996, 1995 and 1994, as follows: Mr. Lowe, $9,500, $4,620 and
$3,661; Mr. Oliver, $6,279, $3,196 and $2,385; and Mr. Sherron, $5,537,
$2,819 and $2,047; and (ii) life insurance premiums paid by Bancshares
for each of 1996 and 1995 as follows: Mr. Lowe, $30,548 and $2,253; Mr.
Oliver, $25,200 and $1,643; and Mr. Sherron, $4,757 and $535.
The following table sets forth certain information regarding the stock options
granted to the executive officers of Bancshares in 1996. Bancshares has no
outstanding stock appreciation rights ("SARs") and granted no SARs during 1996.
In addition, in accordance with the rules of the SEC, there are shown the
hypothetical gains or "option spreads" that would exist for the respective
options based on assumed rates of annually compounded Common Stock price
appreciation of 5% and 10% from the date the options were granted over the full
option term.
6
<PAGE> 9
<TABLE>
<CAPTION>
OPTION GRANTS IN LAST FISCAL YEAR(1)
Individual Grants
------------------------------------
Potential Realizable
Value at Assumed
Percent of Annual Rates of
Number of Total Stock Price
Securities Options Exercise Appreciation for
Underlying Granted to or Base Option Term
Options Employees in Price Expiration ---------------------------
Name Granted (#) Fiscal Year ($/Sh) Date(1) 5% ($) 10% ($)
---- ----------- ----------- ------ ------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
Robert F. Lowe 10,000 25.8 $16.25 05/24/06 102,195 258,983
Monty J. Oliver 5,000 12.9 $16.25 05/24/06 51,097 129,491
H. Franklin Sherron, Jr. 5,000 12.9 $16.25 05/24/06 51,097 129,491
</TABLE>
- ---------------------------------
(1) Options become exercisable in installments of 20% on each anniversary date
following the date of grant, and thereafter may be exercised in whole or in
part at any time prior to the expiration date.
The following table sets forth certain information regarding stock options
exercised during 1996 by the executive officers of Bancshares, including the
aggregate value of gains on the date of exercise. In addition, this table
includes the number of shares of Common Stock subject to exercisable and
unexercisable stock options as of December 31, 1996. Also reported are the
values for "in-the-money" options based on the positive spread between the
exercise price of such stock options and the closing sale price of a share of
Bancshares Common Stock on the Nasdaq National Market on December 31, 1996.
<TABLE>
<CAPTION>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION VALUES(1)
- --------------------------------------------------------------------------------------------------------------------------
Number of Value of
Securities Unexercised
Underlying In-the-Money
Options at Options
Shares FY-End (#) at FY-End ($)
Acquired on Value Exercisable/ Exercisable/
Name Exercise (#) Realized ($) Unexercisable Unexercisable
- ----------------------------- ---------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Robert F. Lowe 7,618 63,456 31,251 / 41,248 238,382/207,860
Monty J. Oliver 4,296 37,513 12,500 / 17,500 95,350/86,400
H. Franklin Sherron, Jr. 4,296 36,653 12,500 / 17,500 95,350 / 86,400
</TABLE>
- ----------------------------
(1) The information concerning options gives effect to the 25% stock split in
the form of a stock dividend paid on February 15, 1996.
7
<PAGE> 10
PENSION PLAN
The Bank's Employees' Pension Plan is a non-contributory plan that covers all
employees who work at least 1,000 hours annually, are at least 21 years old and
have completed one year of service. The plan is a defined benefit plan,
providing for benefits equal to .8 percent of final average monthly
compensation, multiplied by years of credited service, plus .65 percent of final
average monthly compensation in excess of the social security compensation
amount, multiplied by years of credited service not to exceed 35 years. Final
average compensation is the average of the five highest consecutive calendar
years of compensation paid during the 10 calendar years preceding retirement.
The compensation covered by the plan consists of base salary. A participant's
accrued benefit is fully vested and non-forfeitable upon reaching age 65. If a
participant terminates employment for any reason other than death, disability or
retirement, the participant s accrued benefits will vest after five years of
service. Benefits can be paid in a lump sum only if the distribution is $10,000
or less. Distributions over $10,000 must be paid in monthly payments. Benefits
also are provided for early retirement, deferred retirement, disability
retirement and death.
The following table shows estimated annual benefits payable upon retirement at
age 65 to participants under the plan.
<TABLE>
<CAPTION>
PENSION PLAN TABLE
ESTIMATED YEARS OF CREDITED SERVICE
ANNUAL BENEFIT PAYABLE ON RETIREMENT(1)
Five-Year Average 15 20 25 30 35
Salary at Retirement Years Years Years Years Years
-------------------- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
225,000 30,255 40,339 50,424 60,509 70,594
200,000 30,255 40,339 50,424 60,509 70,594
175,000 30,255 40,339 50,424 60,509 70,594
150,000 30,255 40,339 50,424 60,509 70,594
125,000 24,817 33,089 41,362 49,634 57,907
100,000 19,380 25,839 32,399 38,759 45,219
75,000 13,942 18,589 23,237 27,884 32,532
50,000 8,505 11,339 14,175 17,009 19,844
</TABLE>
- -----------------------------
(1) Some of the amounts shown exceed the limits imposed by federal law for
qualified plans.
Benefits payable as shown in the table are computed on a straight-life annuity
basis. Such amounts are not subject to deduction for Social Security benefits or
other amounts received by participants. Years of credited service for the
persons named in the compensation table above are as follows: Mr. Lowe (26); Mr.
Oliver (18); and Mr. Sherron (6).
8
<PAGE> 11
PERFORMANCE GRAPH
The following graph and table compare, for the five year period ended December
31, 1996, the cumulative return to shareholders of Bancshares with the Standard
& Poor's 500 Stock Index and an index consisting of 21 major regional banks,
assuming investment of $100 at the beginning of the period and the reinvestment
of dividends.
<TABLE>
<CAPTION>
12/31/91 12/31/92 12/31/93 12/31/94 12/31/95 12/31/96
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
LSB Bancshares, Inc. $100.00 $179.14 $188.79 $217.35 $244.47 $309.11
S&P 500 Composite $100.00 $107.62 $118.46 $120.03 $165.13 $203.05
Major Regional Banks $100.00 $127.34 $135.00 $127.78 $201.20 $274.92
</TABLE>
REPORT OF THE STOCK OPTION AND COMPENSATION COMMITTEE
The following report of the Stock Option and Compensation Committee of the Board
of Directors of Bancshares provides information with respect to the compensation
paid to Bancshares' Chief Executive Officer, Robert F. Lowe, and to its
executive officers in general.
Bancshares' executive compensation program is administered by the Stock Option
and Compensation Committee (the "Committee") of the Board of Directors of
Bancshares. The Committee is composed of the individuals listed below, each of
whom is a non-employee director of Bancshares. Bancshares' compensation program
for executive officers consists of the following elements: annual salary;
performance-based cash awards under the Incentive Plan; annual grants of options
under the 1996 Omnibus Stock Incentive Plan (the "1996 Plan"); and annual
matching contributions under the Lexington State Bank Employees Savings Plus
Plan (the "Bank Savings Plan") . The Committee grants stock options under the
1996 Plan to management employees and recommends to Bancshares' Board of
Directors the salary levels and performance
9
<PAGE> 12
goals and incentive compensation amounts for executive officers. The Board of
Directors of the Bank determines matching contributions under the Bank Savings
Plan.
Bancshares' executive compensation program is designed to enable Bancshares to
attract, retain and reward executive officers. The Committee intends to keep
compensation levels competitive with the Bank's primary competitors. Prior to
1996, Bancshares' executive compensation program did not include performance
thresholds or other measures that directly relate base salaries to operating
performance.
In 1995, the Committee concluded a comprehensive review of Bancshares' executive
compensation program with the assistance of compensation consultants on matters
pertaining to the strategy, structure and administration of Bancshares'
executive compensation program. As a result of this review, certain
modifications were made to Bancshares' executive compensation program to
strengthen the link between executive compensation, Bancshares' and individual
performance and shareholder interests. In accordance with this strategy, in
February 1996, Bancshares' Board of Directors adopted the Incentive Plan. Under
the Incentive Plan, executive officers selected by the Committee may earn
incentive compensation if Bancshares achieves operating performance targets and
the executive officers achieve individual performances objectives established by
the Committee. The Committee believes the Incentive Plan motivates Bancshares'
executive officers to attain Bancshares' business goals.
The following sections of this Report describe the compensation program for
executive officers in effect in 1996.
Base Salary
Base salaries for executive officers are reviewed and approved by Bancshares'
Board of Directors based upon recommendations by the Committee. The Committee
recommends salaries based upon a review of the range of salaries earned by
executive officers of the Bank's primary competitors, although there is no
predetermined point within such range at which the Committee targets salaries.
In determining base salaries, the Committee does not establish performance
thresholds or other measures that directly relate base salaries to operating
performance.
The base salary earned by Bancshares' Chief Executive Officer, Robert F. Lowe,
during 1996 reflects the base salary policies described above. Mr. Lowe's 1996
salary was at the midpoint of the range of salaries earned by the chief
executive officers of the Bank's competitors. The Committee believes that Mr.
Lowe's 1996 salary, which remained the same as his 1995 salary, is modest in
relation to Bancshares' performance and conservative in relation to salaries
earned by executives of the Bank's primary competitors.
Incentive Compensation
Incentive compensation awards for executive officers of Bancshares granted under
the Incentive Plan are determined by the Committee based on each executive
officer's achievement of pre-established performance goals. These goals are
determined by the Committee for each executive officer and are tied to
measurements of corporate objectives, such as return on average assets, asset
growth, net interest margin, efficiency ratio and delinquency and charge off
percentages, and, in some instances, other objectives that are specific to the
executive officer's job function.
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For performance during 1996, Bancshares awarded cash incentive compensation
under the Incentive Plan totaling $193,284 to twenty-one officers, which amount
includes an aggregate of $85,560 paid to Bancshares' executive officers. The
incentive compensation awards granted to Mr. Lowe and to Mr. Sherron were based
solely upon Bancshares' performance as measured by the corporate objectives set
forth above, while the incentive compensation award granted to Mr. Oliver was
based on such corporate objectives and his management of the annual budget
process, investor and analyst relations and compliance with regulations
promulgated by the SEC and The Nasdaq Stock Market, Inc. Each of the executive
officers met or exceeded the performance goals established for him for 1996.
Stock Options
The Committee awards stock options to executive officers as a long-term
incentive to align the executives' interests with those of other shareholders
and to encourage significant stock ownership. Under the 1996 Plan, the Committee
grants to eligible employees options to purchase Bancshares' Common Stock at a
price equal to the fair market value of Bancshares' Common Stock on the date of
grant. Eligible employees under the 1996 Plan are those key employees who, in
the judgment of the Committee, are in a position to materially affect the
profits of Bancshares and its subsidiaries by reason of the nature and extent of
their duties.
In 1996, pursuant to the 1996 Plan the Committee granted options for 44,250
shares of Bancshares' Common Stock to employees of Bancshares and the Bank,
including options for 10,000 shares granted to Mr. Lowe and 5,000 shares for
each of Messrs. Oliver and Sherron. The Committee has not adopted any objective
criteria that relates the level of options granted to the executive officers to
performance of Bancshares or the individuals. In approving the grant to Mr.
Lowe, the Committee considered numerous factors including Bancshares' operating
performance, Mr. Lowe's prior contributions and potential to contribute in the
future and practices within the Bank's peer group with respect to granting
options, although none of these factors was determinative.
The stock options granted under the 1996 Plan become exercisable in twenty
percent (20%) installments on each of the first five anniversaries of the date
of grant. The option recipients, including Mr. Lowe, will receive value from
these grants only if the price of Bancshares' Common Stock increases above the
grant price.
Matching Contributions
The Bank Savings Plan is a voluntary defined contribution benefit plan designed
to provide additional incentive and retirement security for eligible employees
of the Bank. All Bank employees over the age of 21 are eligible to participate
in the Plan. The executive officers of Bancshares participate in the Plan on the
same basis as all other eligible employees of the Bank. Under the Bank Savings
Plan, each eligible employee of the Bank may elect to contribute on a pre-tax
basis to the Bank Savings Plan 2% to 10% of his or her compensation, subject to
certain limitations that may lower the maximum contributions of more highly
compensated participants.
At the beginning of each year, the Bank determines the amount of its matching
contributions to be made during the year. In 1996, the Bank's matching
contributions totalled $117,359,
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including $9,500 contributed to Mr. Lowe, $6,279 contributed to Mr. Oliver and
$5,537 contributed to Mr. Sherron.
This report is submitted by the Stock Option and Compensation Committee of the
Board of Directors of Bancshares.
STOCK OPTION AND COMPENSATION COMMITTEE:
Robert B. Smith, Jr., Chairman
Michael S. Albert
Margaret Lee W. Crowell
Burr W. Sullivan
Roberts E. Timberlake
Julius S. Young, Jr.
COMPENSATION OF DIRECTORS
Members of the Board of Directors of Bancshares receive a fee of $150 for each
meeting attended plus an annual retainer of $2,000. Each non-management director
receives a fee of $100 for each committee meeting attended of Bancshares and the
Bank and a fee of $100 for each meeting attended of the Board of Managers for
branches of the Bank. Each year Bancshares also grants each non-management
director a five-year option to purchase 500 shares of Common Stock. The exercise
price of each option is the fair market value of the Common Stock on the date of
grant. The option is granted on the date of the annual shareholders' meeting.
In addition, directors may participate in Bancshares' Deferred Compensation Plan
for Directors, under which a director may defer a designated amount of his or
her annual compensation until he or she retires, dies while still a director,
becomes permanently disabled or otherwise discontinues service as a director.
Interest on each director's deferred account is credited at the end of each
month at a rate of six percent per annum. Each director's interest in the plan
is nonassignable, although each director may name a beneficiary to receive his
or her deferred compensation in the event of the director's death. During the
last fiscal year, each director allocated 100% of his or her 1996 director's
fees to his or her deferred account.
SECTION 16 REPORTING DELINQUENCIES
Section 16(a) of the Securities Exchange Act of 1934 requires Bancshares'
executive officers, directors and persons who beneficially own more than ten
percent of the outstanding shares of Common Stock to file with the SEC reports
disclosing their initial ownership of Common Stock as well as subsequent reports
disclosing changes in such ownership. To Bancshares' knowledge, based solely on
a review of copies of such reports furnished to Bancshares and written
representations that no other reports were required during the year ended
December 31, 1996, Bancshares' executive officers and directors complied with
all Section 16 (a) filing requirements.
CERTAIN TRANSACTIONS
Certain directors and officers of Bancshares and companies with which directors
or officers are associated are customers of the Bank and as such may from time
to time borrow from the Bank
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within prescribed limitations. Any such loans and commitments are made in the
ordinary course of business, on terms no more favorable, including interest
rates and collateral, than those prevailing at the time for comparable
transactions with other persons and do not involve more than the normal risk of
collectability or present other unfavorable features. The indebtedness of all
directors and officers as a group represents 12.0 percent of Bancshares'
shareholders' equity.
PROPOSAL 2: INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors of Bancshares has appointed the firm of Turlington and
Company, Certified Public Accountants, for the purpose of auditing the financial
statements of Bancshares and its subsidiaries for the fiscal year ended December
31, 1997, and shareholders are being asked to ratify this appointment.
Turlington and Company has been employed in this capacity by Bancshares since
1982. Fees charged by this firm are furnished at rates and upon terms that are
customarily charged by other independent auditing firms. A representative of the
firm will be present at the Annual Meeting and will have an opportunity to make
a statement if he desires to do so and to respond to appropriate questions.
PROPOSAL 3: SHAREHOLDER PROPOSAL RELATING TO
MINIMUM SHARE OWNERSHIP BY DIRECTORS
Bancshares has been advised that W. Robert Koontz, 4630 W. Old U.S. 64,
Lexington, North Carolina 27292, has proposed the following resolution to be
considered by the shareholders of Bancshares:
"RESOLVED: That the shareholders of LSB Bancshares, Inc. recommend that
the Board of Directors take the necessary steps to amend the company's
governing instruments to adopt the following:
"Beginning on the 1997 LSB Bancshares Annual Shareholders
meeting, excluding those directors elected in 1995, 1996, and
1997, each director before qualifying as a director of LSB
Bancshares and at all times while serving as a director,
excluding stock options, convertible securities and warrants,
shall own 500 shares of common LSB Bancshares, Inc. Should any
director fail to comply with this ownership requirement, such
director shall have sixty (60) days from the date of
non-compliance to again comply. Failure to again comply, shall
result in disqualification and such director's position shall
be declared vacant."
In support of the foregoing resolution, Mr. Koontz states:
"REASONS: One of the most important issues before the American
people today is accountability. In our government, our
schools, our legal system and our corporations, we have lost
accountability. Every one wants to be under the umbrella of
tenure, seniority, guarantee, and Golden Parachutes. Why would
management or the Board of Directors object to its directors
being mandated to own 500 shares?
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Generally speaking, corporate management has created a monopoly. It
does not matter if a director knows anything about banking or financial
matters, just as long as he/she has a degree from a prestigious school
or a relationship with the officers or other directors. I am not
suggesting that the Board of Directors invest in 500 shares in some new
or unproven company, but a company with solid assets. If the Board of
Directors does not have confidence in themselves to direct LSB
profitably, surely they should not serve on the Board of Directors of
LSB Bancshares.
If you AGREE, please mark your proxy FOR a beginning to
Accountability."
The Board of Directors UNANIMOUSLY recommends a vote AGAINST the above proposal.
Mr. Koontz's resolution is substantially identical to a resolution he introduced
at each of the 1993, 1994, 1995 and 1996 Annual Meetings. Shares representing
less than 17% of the outstanding Common Stock were voted in favor of Mr.
Koontz's resolution at each of the four previous shareholders' meetings.
The Board of Directors of Bancshares does not believe that minimum share
ownership requirements for directors of Bancshares will serve any useful
purpose. Under North Carolina law, each director of Bancshares who is also a
director of the Bank is required to own shares of Common Stock having an
aggregate book value of at least $1,000, or 104 shares at December 31, 1996. The
Board of Directors of Bancshares continues to believe that minimum share
ownership requirements for directors, over and above those imposed by North
Carolina law, would not benefit Bancshares but would unnecessarily restrict
Bancshares' ability to attract and retain qualified candidates to serve as
directors of Bancshares.
In addition, the Board of Directors believes that the reasons given by Mr.
Koontz in support of his proposal are untrue as applied to the members of the
Board of Directors of Bancshares. The Board of Directors believes that
historically there has been no relationship between a director's contributions
to Bancshares and the level of his or her investment in Common Stock. Moreover,
contrary to Mr. Koontz's statements, directors of Bancshares are not selected on
the basis of their relationships with other directors or officers, the schools
they attended or any other improper factors. Directors are nominated by the
Board of Directors, and elected by the shareholders of Bancshares, on the basis
of their experience, individual accomplishments, knowledge, ability, judgment
and a number of other factors that may or may not include a special knowledge of
the banking industry. Bancshares has for a number of years sought to maintain
diversity on its Board of Directors, and the current composition of the Board
reflects this policy. Bancshares believes a diverse group of directors will
enhance the perspectives and collective talents of Board members and allow the
Board to better manage all facets of the business and affairs of Bancshares.
Accordingly, based on these facts, the Board of Directors strongly believes Mr.
Koontz's proposal is without merit and should not be supported by the
shareholders.
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SHAREHOLDERS' PROPOSALS
Any shareholder proposal to be included in the proxy materials relating to the
1998 Annual Meeting must be received by the Secretary of Bancshares, One LSB
Plaza, Lexington, North Carolina 27292, by November 13, 1997.
In addition to any other applicable requirements, for business to be properly
brought before the 1998 Annual Meeting by a shareholder even if the proposal is
not to be included in Bancshares' proxy statement, pursuant to Bancshares'
bylaws, the shareholder must give notice in writing to the Secretary of
Bancshares not later than January 13, 1998. As to each matter, the notice must
contain (i) a brief description of the business desired to be brought before the
annual meeting and the reasons for addressing it at the annual meeting, (ii) the
name and record address of the shareholder proposing such business, ( iii ) the
number of shares of Common Stock owned of record and beneficially by such
shareholder and (iv) any material interest of the shareholder in such business.
OTHER MATTERS
The Board of Directors of Bancshares knows of no other matters intended to be
presented for consideration at the meeting. However, if any other matters
properly come before the meeting, it is the intention of the persons named in
the accompanying proxy to vote on such matters in accordance with their best
judgment.
Robert F. Lowe, President
March 14, 1997
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APPENDIX A
LSB BANCSHARES, INC.
One LSB Plaza
Lexington, North Carolina 27292
This Proxy is solicited on behalf of the Board of Directors
The undersigned hereby appoints David A. Smith and Robert B. Smith, Jr., and
each of them, as proxies (and if the undersigned is a proxy, as substitute
proxies), with power of substitution, and hereby authorizes each of them to
represent and to vote, as designated below, all the shares of LSB BANCSHARES,
INC. held of record by the undersigned at the close of business on March 3,
1997, at the Annual Meeting of Shareholders to be held on April 16, 1997, at
1:00 p.m. at the Smith Young YMCA and at any adjournments thereof.
This Proxy, when properly executed, will be voted in the manner directed herein
by the undersigned shareholder, if no direction is made, this proxy will be
voted for all nominees for Director, for Proposal 2 and against Proposal 3.
If the shareholder is a participant in the Shareholders Dividend Reinvestment
and Stock Purchase Plan, the proxy card represents the number of shares in the
dividend reinvestment account as well as shares owned of record directly by the
shareholder.
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PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY,
IN THE ENCLOSED ENVELOPE
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Please sign exactly as name appears above. When shares are held by joint
owners, both should sign. When signing as an executor, administrator, trustee,
or guardian, please give full title as such. If a corporation, please sign in
full corporate name by the president or other authorized officer. If a
partnership, please sign in the partnership name by an authorized person.
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HAS YOUR ADDRESS CHANGED?
<PAGE> 19
[X] PLEASE MARK VOTES AS IN THIS EXAMPLE
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LSB BANCSHARES, INC.
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RECORD DATE SHARES:
Please be sure to sign and date this Proxy. Date
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Shareholder sign here Co-owner sign here
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DETACH CARD
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The Board of Directors recommends a vote "FOR" proposal Nos. 1 and 2.
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1. Election of Directors. With- For All
For hold Except
Margaret Lee W. Crowell
Robert F. Lowe [ ] [ ] [ ]
Roberta E. Timberlake
Julius S. Young, Jr.
Instruction: To withhold authority to vote for any individual nominee, mark
the "For All Except" box and strike a line through the nominee's name in
the list provided above.
For Against Abstain
2. Proposal to ratify the appointment of Turlington
and Company, Certified Public Accountants, [ ] [ ] [ ]
for the year ending December 31, 1997.
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The Board of Directors recommends a vote "AGAINST" proposal No. 3.
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For Against Abstain
3. Shareholder proposal by W. Robert Krantz
relating to minimum share ownership [ ] [ ] [ ]
requirements for directors.
4. In their discretion, the proxies are authorized to vote upon such other
business and matters as may properly come before the meeting or at any
adjournment(s) thereof.
Mark box at right if an address change has been noted on the [ ]
reverse side of this card.
DETACH CARD
