PEOPLES BANCORP OF NORTH CAROLINA INC

Stock-Based Compensation

The Company has an Omnibus Stock Ownership and Long Term Incentive Plan that was approved by shareholders on May 7, 2020 (the “Plan”) whereby certain stock-based rights, such as stock options, restricted stock, restricted stock units, performance units, stock appreciation rights or book value shares, may be granted to eligible directors and employees. A total of 300,000 shares were reserved for issuance under the Plan when it was adopted. Excluding shares to be issued upon the exercise or vesting of existing awards, as of December 31, 2025, a total of 264,640 shares remain available for future awards that may be granted under the Plan. No new awards may be granted after May 7, 2030 (ten years from the Plan effective date).

The fair value of restricted stock units is determined based on the closing price of the Company’s common stock on the date of grant. The Company granted 7,635 restricted stock units under the Plan at a grant date fair value of $17.08 per share in 2020. The Company granted 7,060 restricted stock units under the Plan at a grant date fair value of $22.04 per share in 2021. The Company granted 5,385 restricted stock units under the Plan at a grant date fair value of $27.99 per share in 2022. The Company granted 5,370 restricted stock units under the Plan at a grant date fair value of $32.58 per share in 2023. The Company granted 6,450 restricted stock units under the Plan at a grant date fair value of $29.52 per share in 2024. The Company granted 4,580 restricted stock units under the Plan at a grant date fair value of $27.92 per share in 2025. The Company recognizes compensation expense on the restricted stock units over the four year vesting period, straight-line over the requisite service period, which is generally the vesting period of the award, and is adjusted for forfeitures as they occur. Each restricted stock unit is convertible into one share of the Company’s common stock or cash equivalent when vested. The liability-classified awards are remeasured to fair value at the end of each reporting period until settlement or expiration. As of December 31, 2025, the total unrecognized compensation expense related to the restricted stock unit grants under the Plan was $278,000.

The Company recognized compensation expense for restricted stock units granted under the Plan of $190,000 and $212,000 for the years ended December 31, 2025 and 2024, respectively.