DEF 14A: Penns Woods Bancorp Announces Annual Shareholder Meeting and Director Elections

Penns Woods Bancorp will hold its annual shareholder meeting virtually on May 7, 2024, to elect directors and ratify the appointment of its accounting firm.

Summary

• Penns Woods Bancorp, Inc. will hold its Annual Meeting of Shareholders virtually on May 7, 2024, at 9:00 A.M.
• Shareholders of record as of March 1, 2024, are entitled to vote.
• The meeting will include the election of four Class 2 director nominees for a three-year term expiring in 2027 and the ratification of S.R. Snodgrass, P.C. as the independent registered public accounting firm for the year ending December 31, 2024.
• The board of directors recommends voting FOR the director nominees and FOR the ratification of the accounting firm appointment.
• Shareholders can vote online, by phone, or by returning the proxy card.
• The Corporation has engaged Alliance Advisors LLC to assist with the solicitation of proxies for an estimated fee of $19,000 plus reimbursement of expenses.
• As of March 1, 2024, there were 7,513,898 shares of Common Stock outstanding, each entitled to one vote.
• The board of directors has determined that all of the directors are independent within the meaning of the Nasdaq listing standards, except for Richard A. Grafmyre, Chief Executive Officer of the Corporation, and Brian L. Knepp, President and Chief Financial Officer of the Corporation.
• The Corporation's bylaws provide that the board of directors shall consist of not less than five (5) nor more than twenty-five (25) directors who are shareholders, the exact number to be fixed and determined from time to time by resolution of a majority of the full board of directors, with the number currently set at twelve (12).
• The mandatory retirement age for a director is upon attaining age 76.
• The annual total compensation of the Corporation's median employee (other than the Chief Executive Officer) was $47,826 for fiscal year 2023.
• The annual total compensation of the Corporations Chief Executive Officer, Richard A. Grafmyre, was $1,588,719 for fiscal year 2023.
• The ratio for 2023 of the annual total compensation of the Chief Executive Officer to the median of the annual total compensation of all employees is 33 to 1.
• Total loans outstanding from the Banks at December 31, 2023 to the Corporation's officers and directors as a group, members of their immediate families and companies in which they had an ownership interest of 10% or more was $8,179,000, or approximately 4.27%, of the total equity capital of the Corporation.

Sentiment

Score: 7

Explanation: The document is primarily factual and procedural, outlining the details of the upcoming shareholder meeting and related matters. The tone is professional and informative, with a focus on corporate governance and compliance. There are some positive aspects highlighted, such as the commitment to diversity and environmental impact, but also some negative aspects, such as the CEO pay ratio and a director's past legal issues. Overall, the sentiment is neutral to slightly positive.

Positives

• The board of directors is separating the roles of Chief Executive Officer and Chairman of the Board, which the board of directors believes this arrangement provides stronger corporate governance and conforms to industry best practices.
• The Corporation has a Clawback Policy in place, allowing for the recovery of erroneously awarded incentive-based compensation from executive officers.
• The Corporation encourages stock ownership by directors and senior management to align their interests with those of shareholders.
• The Corporation is committed to supporting a culture of diversity and inclusion among its workforce and community.
• The Corporation has taken steps to limit negative impacts to the environment, such as designing new branches with a minimal footprint and utilizing energy-efficient lighting and HVAC systems.
• The Corporation emphasizes community involvement by employees and provides financial assistance to various non-profit organizations.

Negatives

• In September 2017, director Michael J. Casale, Jr. entered voluntary guilty pleas in the Court of Common Pleas of Lycoming County to one count of criminal trespass and one count of wiretapping in connection with a personal domestic matter.
• The annual total compensation of the Corporations Chief Executive Officer, Richard A. Grafmyre, was $1,588,719 for fiscal year 2023, which is 33 times the annual total compensation of the Corporation's median employee (other than the Chief Executive Officer) of $47,826.

Risks

• The banking industry is highly regulated, and the Corporation faces risks related to compliance with regulations set forth by banking regulatory authorities.
• The Corporation's success is dependent on adequately managing certain lending risks.
• The Corporation's performance is subject to the challenges and opportunities posed by the economic environment.
• The Corporation faces competition for attracting, retaining, motivating, and rewarding executive officers.
• The Corporation's operations, policies, and implementation of strategic plans must compare favorably to those of its peers to maintain a competitive advantage.

Future Outlook

The amended agreement with CEO Grafmyre will ensure his continued commitment on a full-time basis through at least April 30, 2028, and will permit continued focus on organic growth and consideration of new opportunities for balance sheet growth, and permit consideration of possible strategic shifts designed to maximize enterprise value.

Management Comments

• The board of directors believes this arrangement provides stronger corporate governance and conforms to industry best practices.
• The board of directors believes that directors and senior management should have a meaningful ownership interest in the Corporation.

Industry Context

The document provides insight into the corporate governance practices, executive compensation, and risk oversight within the banking industry, particularly for community banks. It also highlights the importance of regulatory compliance and community involvement for financial institutions.

Comparison to Industry Standards

• The document mentions a peer group of bank holding companies with assets between $1 billion and $3 billion, including ACNB Corporation, Chemung Financial Corp., and others.
• Executive compensation practices are compared to those of peer companies to ensure competitiveness.
• The document references Nasdaq listing standards and SEC rules for director independence and related party transactions, indicating adherence to industry governance standards.
• The Corporation's environmental initiatives, such as energy-efficient branches and reduced paper usage, align with growing sustainability trends in the business world.

Corporate Governance

Related Party Transactions

• Total loans outstanding from the Banks at December 31, 2023 to the Corporation's officers and directors as a group, members of their immediate families and companies in which they had an ownership interest of 10% or more was $8,179,000, or approximately 4.27%, of the total equity capital of the Corporation.
• Loans to such persons were made in the ordinary course of business, were made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with persons not related to the Corporation, and did not involve more than the normal risk of collectability or present other unfavorable features.

Stakeholder Impact

• Shareholders are being asked to vote on the election of directors and the ratification of the accounting firm, which will impact the governance and financial oversight of the Corporation.
• Employees are affected by the Corporation's compensation policies, benefit plans, and commitment to diversity and inclusion.
• Customers may be impacted by the Corporation's community involvement and environmental initiatives.
• The Corporation's performance and financial stability affect its suppliers and creditors.

Next Steps

• Shareholders are urged to vote their shares by using the Internet, telephone, or by returning their proxy card.
• The Corporation will hold its Annual Meeting of Shareholders virtually on May 7, 2024.
• The board of directors will consider the outcome of the shareholder vote on the ratification of the independent registered public accounting firm.
• The Audit Committee will consider in advance of the provision of any nonaudit services by our independent accountant whether the provision of such services is compatible with maintaining the independence of our external auditors.
• Shareholders may submit proposals for inclusion in the Corporation's proxy materials and consideration at the 2025 annual meeting of shareholders.

Key Dates

Keywords

proxy statement, annual meeting, directors, shareholders, compensation, governance, election, ratification, accounting firm, Penns Woods Bancorp