PENNS WOODS BANCORP, INC.
Corporate Headquarters
115 South Main Street
Jersey Shore, PA 17740
Theodore H. Reich
President
and
Chief Executive Officer
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON April 28, 1999
To Our Shareholders:
Notice is hereby given that the Annual Meeting of holders of
common stock of Penns Woods Bancorp, Inc., (the "Corporation")
will be held at the Williamsport Branch Office of Jersey Shore
State Bank (the "Bank"), 300 Market Street, Williamsport, PA
17703-0967, on April 28, 1999, at 1:00 P.M., for the following
purposes:
1. To elect three (3) Class 3 Directors, to serve for a
three-year term that will expire in 2002, and until
their successors are elected and qualified.
2. To ratify the appointment by the Corporation's Board
of Directors of Parente, Randolph, Orlando, Carey &
Associates of Williamsport , Pennsylvania, Certified
Public Accountants as the independent auditors for the
Corporation for the year ending December 31, 1999; and
3. To transact such other business as may properly come
before the Annual Meeting, and any adjournment or postponement
thereof.
Holders of record at the close of business on March 9, 1999,
shall be entitled to notice of and to vote at the Annual Meeting
and any adjournment or postponement thereof. At the Annual
Meeting, each shareholder is entitled to one vote for each share
of common stock, $10.00 par value, of the Corporation registered
in the shareholder's name on the record date.
A shareholder who returns a Proxy may revoke the Proxy at
any time before it is voted by (1) giving written notice of
revocation to Sonya E. Hartranft, Secretary, Penns Woods Bancorp,
Inc., 300 Market Street, PO Box 967, Williamsport, PA
17703-0967, (2) executing a later-dated Proxy and giving written
notice thereof to the Secretary of the Corporation or (3) voting
in person after giving written notice to the Secretary of the
Corporation.
All Proxies properly executed and not revoked will be voted
as specified.
A copy of the Corporation's Annual Report and Form 10-K for
the fiscal year ended December 31, 1998 is being mailed with this
Notice. The Annual Report should not be regarded as Proxy
solicitation materials.
You are urged to mark, sign, date and promptly return your
Proxy in the enclosed postage-paid envelope so that your shares
may be voted in accordance with your wishes and in order that the
presence of a quorum may be assured. The prompt return of your
Proxy, regardless of the number of shares you hold, will aid the
Corporation in reducing the expense of additional Proxy
solicitation.
You are cordially invited to attend the Annual Meeting. The
giving of such Proxy does not affect your right to vote in person
at the Annual Meeting, if you give written notice to the
Secretary of the Corporation of your intention to vote at the
Annual Meeting.
By Order of the Board of Directors,
Theodore H. Reich
President and
Chief Executive Officer
Dated: March 25, 1999
<PAGE>
PENNS WOODS BANCORP, INC.
115 South Main Street, Jersey Shore, PA 17740
PROXY STATEMENT FOR THE ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON April 28, 1999
Introduction, Date, Time and Place of Annual Meeting
This Proxy Statement is being furnished in connection with
the solicitation by the Board of Directors of PENNS WOODS
BANCORP, INC. (the "Corporation"), a Pennsylvania business
corporation, of proxies to be voted at the Annual Meeting (the
"Annual Meeting") of holders of common stock (the "common stock")
of the Corporation to be held on April 28, 1999, at 1:00 P.M., at
the Williamsport Branch Office of Jersey Shore State Bank (the
"Bank"), 300 Market Street, Williamsport, PA 17701, and any
adjournment or postponement thereof.
The main office of the Corporation is located at 115 South
Main Street, Jersey Shore, PA 17740. The telephone number is
(570) 398-2213. All inquiries should be directed to Theodore H.
Reich, President of the Corporation, (570) 322-1111. The Bank is
a wholly owned subsidiary of the Corporation.
Voting Securities
Holders of record of the common stock, par value $10.00 per
share, at the close of business on March 9, 1999, will be
entitled to notice of and to vote at the Annual Meeting. On
March 9, 1999 there were 2,837,167 shares of common stock
issued and outstanding. Each share of the common stock
outstanding as of the close of business on March 9, 1999, is
entitled to one vote on each matter that comes before the meeting
and holders do not have cumulative voting rights with respect to
the election of directors.
Under Pennsylvania law and the Bylaws of the Corporation,
the presence of a quorum is required for each matter to be acted
upon at the Annual Meeting. Votes withheld and abstentions will
be counted in determining the presence of a quorum for the
particular matter. Broker non-votes will not be counted in
determining the presence of a quorum for the particular matter as
to which the broker withheld authority.
Assuming the presence of a quorum, the three nominees for
director receiving the highest number of votes cast by
shareholders entitled to vote for the election of directors shall
be elected. Votes withheld from a nominee and broker non-votes
will not constitute or be counted as votes cast for such nominee.
Assuming the presence of a quorum, the affirmative vote of a
majority of all votes cast by shareholders at the Annual Meeting
is required for the ratification of the independent auditors.
<PAGE 1> Abstentions and broker non-votes will not constitute or
be counted as votes cast and therefore will not count either for
or against the ratification of auditors.
All Proxies properly executed and not revoked will be voted
as specified.
Solicitation
This Proxy Statement and enclosed form of proxy (the
"Proxy") are first being sent to shareholders of the Corporation
on or about March 25, 1999. Shares represented by the Proxy, if
properly signed and returned, will be voted in accordance with
the specifications made thereon by the shareholders. Any Proxy
not specifying to the contrary will be voted "FOR" the Class 3
nominees noted and "FOR" the ratification of the appointment of
Parente, Randolph, Orlando, Carey & Associates, Certified Public
Accountants, as the independent auditors for the year ending
December 31, 1999. The execution and return of the enclosed
Proxy will not affect a shareholder's right to attend the Annual
Meeting and to vote in person if the shareholder gives written
notice to the Secretary of the Corporation. The cost of
assembling, printing, mailing and soliciting Proxies, and any
additional material which the Corporation may furnish
shareholders in connection with the Annual Meeting, will be borne
by the Corporation. In addition to the solicitation of Proxies
by use of the mails, directors, officers and employees of the
Corporation and\or the Bank may solicit Proxies by telephone,
telegraph or personal interview, with nominal expense to the
Corporation. The Corporation will also pay the standard charges
and expenses of brokerage houses or other nominees or fiduciaries
for forwarding Proxy soliciting material to the beneficial owners
of shares.
Right of Revocation
A shareholder who returns a Proxy may revoke the Proxy at
any time before it is voted (1) by giving written notice of
revocation to Sonya E. Hartranft, Secretary, Penns Woods Bancorp,
Inc., 300 Market Street, P.O. Box 967, Williamsport, PA
17703-0967, (2) by executing a later-dated Proxy and giving
written notice thereof to the Secretary of the Corporation or
(3) by voting in person after giving written notice to the
Secretary of the Corporation.
Quorum
Pursuant to the Bylaws of the Corporation, the presence, in
person or by proxy, of shareholders entitled to cast at least a
majority of the votes which all shareholders are entitled to
cast, shall constitute a quorum for transaction of business at
the Annual Meeting.
<PAGE 2>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
PRINCIPAL OWNERS
As of March 9, 1999, there were no persons who owned of
record or who are known by the Board of Directors to be
beneficial owners of more than 5% of the Corporation's Common
Stock.
BENEFICIAL OWNERSHIP AND OTHER INFORMATION REGARDING DIRECTORS
AND MANAGEMENT
The following table sets forth as of March 9, 1999,
information regarding the number of shares and percentage of the
outstanding shares of Common Stock beneficially owned by each
Director, each nominee for Director and each Executive Officer
named in the Summary Compensation Table appearing herein, and all
Directors and Officers as a group.The following table also sets
forth the name, address, principal occupation and certain
additional information regarding each Director.
<TABLE>
<CAPTION>
Principal Number
Occupation Shares Percentage
Name and for past Affiliate Beneficially of
Address (1) Five Years (2) Age Since (3) Owned (4) Class
<S> <C> <C> <C> <C> <C>
Phillip H. Bower Owner 65 1989 33,202 (J) 1.36%
Turbotville, PA Central Equipment (1989) 5,168 (BI)
Class 2 (B) (Equipment Rental) 250 (BI)
Lynn S. Bowes Farmer 61 1983 19,800 (I) 1.97%
Jersey Shore, PA (1974) 32,245 (J)
Class 3 (A) 3,498 (BI)
250 (BI)
William S. Frazier Owner, 67 1983 43,676 (I) 2.32%
Jersey Shore, PA Shore Auto Parts, I (1980) 7,736 (J)
Class 3 (A) 14,084 (BI)
250 (BI)
James M. Furey, II President & 51 1990 1,495 (I) .24%
Cogan Station, PA General Manager (1990) 4,387 (J)
Class 2 (B) Eastern Wood Products 544 (BI)
(Hardwood Lumber Products) 250 (BI)
Allan W. Lugg Partner in the Law 70 1995 19,142 (I) .68%
Flemington, PA Law Firm of Lugg & Lugg (1995) 250 (BI)
Class 1 (C)
Jay H. McCormack President & Owner, 61 1983 14,036 (I) .60%
Williamsport, PA J.H.M. Enterprises, (1974) 2,656 (BI)
Class 3 (A) (Trucking Company) 250 (BI)
R. Edward Nestlerode, Jr. Vice President 46 1995 2,596 (I) .19%
Lock Haven, PA Nestlerode Contracting (1995) 2,470 (J)
Class 1 (C) Co., Inc. 200 (BI)
250 (BI)
James E. Plummer Secretary of the Bank; 56 1995 9,300 (I) 1.14%
Lock Haven, PA Retired, (1995) 21,588 (J)
Class 2 (B) Former President of 1,080 (BI)
Lock Haven Savings Bank 250 (BI)
<PAGE 3>
Theodore H. Reich President of the Bank 60 1983 32,660 (I) 1.85%
Jersey Shore, PA & the Corporation (1973) 4,532 (J)
Class 2 (B) Corporation 8,426 (BI)
6,900 (BI)
William H. Rockey Senior Vice President of the Bank; 52 1999 20,531 (J) .72%
Centre Hall, PA Senior Vice President of the
Class 1 (C) Corporation;
Former President of First National
Bank of Spring Mills
Hubert A. Valencik Senior Vice President and Loan 57 1984 7,796 (J) .35%
Jersey Shore, PA and Loan Officer of the Bank; 2,000 (BI)
Vice President of the Corporation
Ronald A. Walko Senior Vice President and Loan 52 1986 300 (I) .36%
Montoursville, PA Officer of the Bank; 3,828 (J)
Vice President of the 350 (BI)
Corporation 5,650 (BI)
All Executive Officers and Directors as a Group (D) 338,350 11.82%
*(I) Individual Ownership (J) Joint Ownership (BI) Beneficial Interest
</TABLE>
(A) A Nominee for Class 3 Director whose term, if elected at the
Annual Meeting, will expire in 2002.
(B) A Director whose term expires in 2000.
(C) A Director whose term expires in 2001.
(D) Executive Officer of the Corporation included is Sonya E.
Hartranft, Secretary.
(1) There is no family relationship, by blood, marriage or
adoption between any of the foregoing Directors and any other
Executive Officer or Director of the Corporation or its
subsidiaries. None of the foregoing Directors or Executive
Officers are involved in any legal action that is material to an
evaluation of their ability or integrity to act as a Director or
Executive Officer.
(2) All Directors, nominees and Executive Officers have
held the positions indicated or another senior executive position
with the same entity or one of its affiliates or predecessors for
the past five years except Mr. James E. Plummer who was President
of Lock Haven Savings Bank from September 1987 through April 7,
1995 and William H. Rockey who was President of the First
National Bank of Spring Mills from 1986 through January 8, 1999.
(3) The date appearing in parenthesis opposite each
Director's name in the "Affiliate Since" column represents the
year in which each such nominee or Director became a Director of
the Bank. Each person listed presently serves as a Director of
the Corporation except Mr. Walko and Mr. Valencik who joined the
Bank in 1986 and 1984 respectively.
(4) The foregoing Directors and Executive Officers, as of
March 9, 1999, according to the information supplied by them,
owned beneficially, directly or indirectly, the number of shares
of common stock of the Corporation set opposite their respective
names. Beneficial Ownership is determined in accordance with the
definitions of "beneficial ownership" set forth in the General
<PAGE 4> Rules and Regulations of the Securities and Exchange
Commission and may include, in addition to shares held by the
Director, securities owned by or for the benefit of the
individual's spouse and minor children and any other relative who
has the same home, as well as securities to which the individual
has or shares voting or investment power or has the right to
acquire beneficial ownership within 60 days after March 9, 1999.
Beneficial ownership may be disclaimed as to certain of the
securities.
(5) Mr. Reich also serves as: Director - Norcen
Industries, Inc.; Advisory Director - Northcentral Pennsylvania
Conservancy; Chairman-Elect - Little League Baseball,
Incorporated; General Partner - Keystone Realty Associates
THE BOARD OF DIRECTORS AND ITS COMMITTEES
The Corporation appointed the following committees for 1998:
<TABLE>
<CAPTION>
Number of Times
Met During 1998
<S> <C> <C>
AUDIT: Phillip H. Bower, James M. Furey, II, Allan W. Lugg, 0
Jay H. McCormick and R. Edward Nestlerode, Jr.
BUILDING: Lynn S. Bowes, William S. Frazier, Jay H. McCormick 0
and R. Edward Nestlerode, Jr.
The Bank appointed the following committees for 1998:
AUDIT: Phillip H. Bower, James M. Furey, II, Allan W. Lugg, 4
Jay H. McCormick, and R. Edward Nestlerode, Jr.
BUILDING: Lynn S. Bowes, William S. Frazier, Jay H. McCormick 0
and R. Edward Nestlerode, Jr.
RETIREMENT: Phillip H. Bower, James E. Furey, II, Allan W. Lugg 0
and James E. Plummer
INSURANCE: Phillip H. Bower, William S. Frazier and James E. 1
Plummer
SALARY: Phillip H. Bower, Lynn S. Bowes, William S. Frazier, 1
James M. Furey, II, Allan W. Lugg, Jay H. McCormick,
R. Edward Nestlerode, Jr., and James E. Plummer
ASSET LIABILITY: Lynn S. Bowes, William S. Frazier, Allan W. Lugg, 4
Sonya E. Hartranft, Theodore H. Reich, Hubert A.
Valencik, Ronald A. Walko and William P. Young
</TABLE>
The Board of Directors of the Corporation met eight (8) times
during 1998. The Board of Directors of the Bank met twenty-four
(24) times during 1998. All of the Directors attended at least
75% of the aggregate of all meetings of the Board of Directors
and the Committees of which they were members.
The Board of Directors of the Corporation assumes the role
of the nominating committee. In determining its nominees for
<PAGE 5> election to the Board, the Board of Directors will
consider nominees recommended by shareholders. Such shareholder
recommendations for the year 2000 shall be made in writing no
later than January 1, 2000, addressed to the Corporate Secretary,
Penns Woods Bancorp, Inc., 300 Market Street, Williamsport,
Pennsylvania 17701. Nominations for director to be made at the
Annual Meeting by shareholders entitled to vote for the election
of directors must be submitted to the Secretary of the
Corporation not later than the close of business on the twentieth
day immediately preceding the Annual Meeting, which notice must
contain certain information specified in the Bylaws. No notice
of nomination for election as a director has been received from
any shareholder as of the date of this Proxy Statement. If a
nomination is attempted at the Annual Meeting which does not
comply with the procedures required by the Bylaws or if any votes
are cast at the Annual Meeting for any candidate not duly
nominated, then such nomination and/or such votes may be
disregarded.
PRINCIPAL OFFICERS OF THE CORPORATION
The following table lists the Executive Officers of the
Corporation as of March 9, 1999:
<TABLE>
<CAPTION>
Number Year
Bank of Shares First
Position and/or Offices Employee of the Elected
Name Age With the Corporation Since Corporation an Officer
<S> <C> <C> <C> <C> <C>
Theodore H. Reich 60 President & Chief Executive Officer 1970 52,518 1983
Ronald A. Walko 52 Vice President 1986 10,128 1987
Hubert A. Valencik 57 Vice President 1984 9,796 1985
Sonya E. Hartranft 39 Secretary 1981 4,474 1984
</TABLE>
Mr. Reich joined the Bank in 1970 as Vice President and
Cashier, and was elected President in 1973. On January 7, 1983,
he became President of Penns Woods Bancorp, Inc.
ELECTION OF DIRECTORS
The 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 the full Board of
Directors or by resolution of the shareholders at any annual or
special meeting. The Board of Directors has set the number of
Directors to be ten (10). The Bylaws further provide that the
Directors shall be divided into three (3) classes, as nearly
equal in number as possible, known as Class 1, Class 2 and
Class 3. The Directors of each class serve for a term of three
(3) years and until their successors are elected and qualified.
The Directors of the Corporation serve as follows:
<PAGE 6>
Nominees for Election as Class 3 Directors to serve until 2002:
Lynn S. Bowes
William S. Frazier
Jay H. McCormick
Class 2 Directors to serve until 2000:
Phillip H. Bower
James M. Furey, II
James E. Plummer
Theodore H. Reich
Class 1 Directors to serve until 2001:
Allan W. Lugg
R. Edward Nestlerode, Jr.
William H. Rockey
It is intended that the Proxies solicited hereunder will be
voted FOR (unless otherwise directed) the three (3) nominees
listed previously for election as Class 3 Directors. Each
nominee has agreed to serve if elected and qualified. The
Corporation does not contemplate that any nominee will be unable
to serve as a Director for any reason. However, in the event one
or more of the nominees should be unable to stand for election,
Proxies will be voted for the remaining nominees in accordance
with the best judgment of the Proxyholders.
EXECUTIVE COMPENSATION
The following table sets forth the annual compensation for
services in all capacities to the Corporation and the Bank for
the three years ended December 31, 1998 for those persons who
were as of December 31,1998, Named Executives, (i) the Chief
Executive officer and (ii) the only other two Executive Officers
whose total annual salary and bonus exceeded $100,000:
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION LONG TERM COMPENSATION
AWARDS PAYOUTS
Securities
Name Other Restricted Underlying
and Annual Stock Options/ LTIP All Other
Principal Salary Bonus Compensation Award(s) SAR's Payouts Compensation
Position Year ($)(1) ($) ($) (2) ($) ($) (3) ($) ($)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Theodore H. Reich 1998 $186,606 $107,231 $0 $0 900 $0 $6,148 (4)
Chief Executive 1997 $169,204 $200,500 $0 $0 6,000 $0 $5,939
Officer (6) 1996 $167,904 $ 50,500 $0 $0 6,000 $0 $5,939
Ronald A. Walko 1998 $109,473 $ 34,807 $0 $0 750 $0 $2,890 (5)
Vice President 1997 $100,828 $ 25,500 $0 $0 3,000 $0 $2,604
1996 $95,420 $ 12,500 $0 $0 1,500 $0 $2,158
Hubert A. Valencik 1998 $83,174 $ 18,699 $0 $0 500 $0 $2,037 (5)
Vice President 1997 $78,286 $ 13,511 $0 $0 1,000 $0 $1,836
1996 $74,152 $ 9,000 $0 $0 950 $0 $1,663
</TABLE>
<PAGE 7>
(1) Total includes base salary and directors fees for Mr. Reich
and base salary for Mr. Walko and Mr. Valencik. Directors
fees paid to Mr. Reich were $11,600, $9,200 and $7,900 in
1998, 1997 and 1996, respectively. A retainer fee of $2,000
is included in the directors fee totals for 1998 and 1997
and $1,000 for 1996.
(2) The cost of certain perquisites and other personal benefits
are not included because they do not exceed the lesser of
$50,000 or 10% of the total annual salary and bonus.
(3) Indicates number of shares of Common Stock of the
Corporation for which options were granted during applicable
periods. The options granted in 1997 and 1996 have been
adjusted for the 100% stock dividend issued on January 15,
1998.
(4) Indicates contributions paid in 1998, 1997 and 1996 in the
amount of $3,376, $3,167 and, $3,167 respectively, by the
Bank to the Bank's 401(k) Plan for the benefit of Mr. Reich
and life insurance premiums of $2,772 for each year
indicated.
(5) Indicates contributions paid by the Bank to the Bank's
401(k) Plan for the benefit of Mr. Walko and Mr. Valencik.
(6) Mr. Reich serves as both President and Chief Executive
Officer of the Corporation and the Bank and is a member of
the Board of Directors of the Corporation and the Bank.
(7) Mr. Walko serves as Vice President of the Corporation and as
Senior Vice President and Senior Loan Officer of the Bank.
(8) Mr. Valencik serves as Vice President of the Corporation and
as Senior Vice President and Operations Officer of the Bank.
OPTION/SAR GRANTS
The following table sets forth information concerning grants
of stock options to Theodore H. Reich, Chief Executive Officer of
the Corporation, and the other Named Executives during the fiscal
year ended December 31, 1998.
<PAGE 8>
OPTION/SAR GRANTS IN LAST FISCAL YEAR (1)
<TABLE>
<CAPTION> Potential Realizable
Value at Assumed
Annual Rates of
Stock Price
Appreciation
Individual Grants for Option Term (2)
Number of % of Total
Securities Options/
Underlying SARs
Options/ Granted to Exercise Market
SARs Employees or Base Price at
Granted in Fiscal Price Grant Expiration
Name (#) Year ($/Sh) Date Date 5%($) 10%($)
<S> <C> <C> <C> <C> <C> <C> <C>
Theodore H. Reich 900 10% $58.50 $58.50 12/2003 $14,546 $32,143
Ronald A. Walko 750 8% $58.50 $58.50 12/2003 $12,122 $26,786
Hubert A. Valencik 500 6% $58.50 $58.50 12/2003 $ 8,081 $17,857
</TABLE>
(1) All amounts represent stock options. No SARs or SARs granted
in tandem with stock options were granted to the Named
Executives during the three years ended December 31, 1998.
Options were granted by the Corporation to Mr. Reich,
Mr. Walko and Mr. Valencik pursuant to Stock Option
Agreements by and between the Corporation and Mr. Reich,
Mr. Walko and Mr. Valencik. All options granted under the
agreements represent incentive stock options. Each option
granted shall be exercisable only after the expiration of
six months following the date of grant. The options are
exercisable for a period of five years from the date of
grant.
(2) The dollar amounts set forth above are the result of
calculations made at the 5% and 10% appreciation rates set
forth in Securities and Exchange Commission regulations and
are not intended to indicate future price appreciation, if
any, of the Corporation's Common Stock.
The following table sets forth information concerning the
exercise of options to purchase Common Stock by the Named
Executives during the fiscal year ended December 31, 1998, as
well as the number of securities underlying unexercised options
and the potential value of unexercised options (both options
which are presently exercisable and options which are not
presently exercisable) as of December 31, 1998.
<PAGE 9>
AGGREGATED OPTION/SAR EXERCISES
IN LAST FISCAL YEAR AND FY-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options/SARs Options/SARs
at FY-End (#) at FY-End ($)
Shares Acquired Value Exercisable/ Exercisable/
Name on Exercise (#) Realized ($) Unexercisable (1) Unexercisable (2)
<S> <C> <C> <C> <C>
Theodore H. Reich 6,000 $246,000 6,000/900 $188,550/1,350
Ronald A. Walko 600 $ 24,600 4,900/750 $175,025/1,125
Hubert A. Valencik 450 $ 18,450 1,500/500 $ 52,675/750
</TABLE>
(1) All amounts represent stock options. No SARs or SARs
granted in tandem with stock options were either exercised
during 1998 or outstanding at fiscal year-end 1998.
(2) "In-the-money" options are stock options with respect to
which the market value of the Corporation's Common Stock
exceeded the exercise price at December 31, 1998. The value
of such options is determined by subtracting the aggregate
exercise price of such options from the aggregate fair
market value of the underlying shares of Common Stock on
December 31, 1998.
RETIREMENT PLAN
The Bank has a noncontributory defined benefit pension plan
(the "Plan") for all employees meeting certain age and length of
service requirements. Benefits are based primarily on years of
service and the average annual compensation earned by an
employee, which is the employee's annual compensation averaged
over the five highest paid consecutive calendar years within the
final ten years of employment. Annual compensation is based
upon the employee's W-2 wages, which includes base salary, bonus,
personal vehicle mileage for certain executive officers and life
insurance coverage that exceeds $50,000. The Bank's funding
policy is consistent with the funding requirements of Federal law
and regulations. Plan assets are comprised of common stock and
U.S. Government and corporate debt securities.
The accrued Normal Retirement Benefit is determined by the
following formula:
1.4% of the average annual compensation up to social
security covered compensation multiplied by the credited service,
plus 2% of the average annual compensation that is in excess of
the Social Security covered compensation multiplied by the number
of years of credited service. Based on the preceding formula,
projected annual retirement benefits for a participant turning
age 65 in 1998 are set forth below.
<PAGE 10>
<TABLE>
<CAPTION>
Final Five Years Total Projected Years of Service
Annual Compensation 15 20 30 35
<S> <C> <C> <C> <C>
10,000 2,100 2,800 4,200 4,900
20,000 4,200 5,600 8,400 9,800
30,000 6,300 8,400 12,600 14,700
40,000 9,198 12,265 18,397 21,463
50,000 12,198 16,265 24,397 28,463
60,000 15,198 20,265 30,397 35,463
70,000 18,198 24,265 36,397 42,463
80,000 21,198 28,265 42,397 49,463
90,000 24,198 32,265 48,397 56,463
100,000 27,198 36,265 54,397 63,463
125,000 34,698 46,265 69,397 80,963
150,000 * 42,198 56,265 84,397 98,463
175,000 42,198 56,265 84,397 98,463
200,000 42,198 56,265 84,397 98,463
225,000 42,198 56,265 84,397 98,463
250,000 42,198 56,265 84,397 98,463
</TABLE>
* Compensation for the purpose of calculating benefits is
limited by the Internal Revenue Code to $150,000.
The estimated annual benefits payable upon retirement at
normal retirement age to Theodore H. Reich for the fiscal year
1998 is $95,989, to Mr. Walko is $43,468 and to Mr. Valencik is
$28,336. As of December 31, 1998, Mr. Reich was credited with
twenty-six years of service, Mr. Walko was credited with eleven
years of service and Mr. Valencik was credited with thirteen
years of service. The number of Plan Participants in 1998 was
127. Total plan assets as of December 31, 1998 were $3,475,847.
COMPENSATION OF DIRECTORS
All directors of the Bank receive $400.00 for each meeting
of the Board of Directors and $200.00 for each committee meeting
of the Board of Directors of the Bank. A $2,000 retainer fee was
also paid to each Director of the Corporation during 1998. In
addition, directors receive compensation for accompanying an
officer on property appraisals at a rate of $20.00 for the first
hour and $10.00 for each subsequent hour. The Secretary of
the Board of Directors also receives $50.00 for each Board
meeting. In the aggregate, the Board of Directors received
$83,465.00 for all Board of Directors' meetings and committee
meetings of the Bank attended. This total also includes the
total received for appraisals, the secretarial function and the
retainer fee. A portion of these fees were used to fund a
deferred compensation plan for Directors who participated in the
plan.
BOARD COMPENSATION REPORT ON EXECUTIVE COMPENSATION
The Board of Directors of the Corporation is responsible for
the management of the affairs of the Corporation and the
supervision of its subsidiary, Jersey Shore State Bank. The
<PAGE 11> Board of Directors best serves the interests of its
shareholders, customers and the communities served by the
Corporation and its subsidiary by engaging persons who have the
skills and expertise to implement the strategic goals and
objectives of the Corporation in a cost-effective manner. The
Corporation's philosophy concerning the Bank's compensation
program is to offer
competitive compensation for each employee based upon their
personal performance and contributions to the success of the
Corporation.
The Salary Committee, which is comprised of the eight
outside directors listed below, administers the compensation
program. The Committee's objective is to establish a
compensation policy that will enable the Corporation to attract,
retain, motivate and reward executive officers who are critical
to the success of the Corporation. The Committee believes that
the existing compensation program accomplishes these objectives.
The Committee determines annually the compensation of the
executive officers, which includes the chief executive
officer (the "CEO"), the senior vice presidents, the controller
and other vice presidents. The Board of Directors ratifies all
actions taken by the Committee as they relate to the compensation
of the executive officers.
CEO and Named Executive Compensation
The Board of Directors determined that the 1998 base
compensation for the CEO, Mr. Theodore H. Reich, would be
$175,006 based upon an Executive Employment Agreement that was
adopted in January 1995. The 1998 base compensation for
Mr. Ronald A. Walko was determined to be $109,473 based upon an
Employment Agreement that was adopted in August 1991 and the
base compensation for Mr. Hubert A. Valencik was determined to be
$83,174 based upon an Employment Agreement that was adopted in
October 1984. The Employment Agreements are described on the
following pages.
Executive Officers
Increases in the compensation of the other executive
officers is determined by the Committee based upon, among other
things, the following factors: earnings, return on assets,
return on equity, total assets, and the quality of the loan
portfolio of the Corporation and the Bank. Notwithstanding the
foregoing, the Committee's determination is based upon a review
of all information that it deems relevant in determining, with
respect to each particular executive officer, the compensation to
be paid to such officer.
In addition to base salary, the executive officers of the
Corporation and the Bank may participate in the annual and long
term incentive plans, including stock options and bonuses that
are granted to certain senior executive officers and a 401(k)
plan. This plan is available to all qualified Bank employees.
<PAGE 12> The compensation opportunities that are available to
the Bank's employees are influenced by market conditions, the
individual's responsibilities, and the employee's contributions
to the success of the Corporation. Employees are reviewed
annually on a calendar basis. The Bank attempts to offer
compensation that is comparable with that offered by other
employers in our industry. The Corporation strives to meet its
objectives and strategic goals by providing fair compensation to
its employees.
Members of the Salary Committee
Phillip H. Bower Lynn S. Bowes
William S. Frazier James M. Furey, II
Allan W. Lugg Jay H. McCormick
R. Edward Nestlerode, Jr. James E. Plummer
COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Mr. James E. Plummer retired from Jersey Shore State Bank in
June 1995. He was the President of Lock Haven Savings Bank until
April 1995. He is currently a member of the Salary Committee.
Mr. Plummer has no disclosable relationships or related
transactions with the Corporation or any other subsidiary. He is
Secretary of the Board of Directors of the Bank.
SHAREHOLDER RETURN PERFORMANCE GRAPH
Set forth below is a line graph comparing the yearly dollar
change in the cumulative shareholder return on the Corporation's
Common Stock against the cumulative total return of the S&P 500
Stock Index and the Peer Group Index for the period of five
fiscal years commencing January 1, 1993 and ending December 31,
1998. The shareholder return shown on the graph below is not
necessarily indicative of future performance.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
Penns Woods Bancorp, Inc. Common Stock,
S&P 500 & Peer Group Index (1)
<TABLE>
<CAPTION>
+ S&P 500 * Peer Group Index ** Penns Woods Bancorp, Inc.
1993 1994 1995 1996 1997 1998
<S> <C> <C> <C> <C> <C> <C>
S&P 500 $100.00 101.35 139.30 171.21 228.25 290.70
Peer Group $100.00 115.37 124.50 137.38 193.09 225.95
Penns Woods Bancorp, Inc. $100.00 119.55 140.02 173.48 277.84 502.04
</TABLE> <PAGE 13>
(1) The Peer Group for which information appears above includes
the following companies: ACNB Corporation; CNB Financial
Corporation; Citizens and Northern Corporation; Drovers
Bancshares Corporation; First West Chester Corporation;
Franklin Financial Services Corp.; Hanover Bancorp Inc.;
Penn Security Bank and Trust Company; Pennrock Financial
Services Corp.; and Sterling Financial Corporation. These
companies were selected based on four criteria: total
assets between $350 million and $825 million; market
capitalization greater than $60 million; headquarters
located in Pennsylvania; and are quoted on the NASDAQ stock
market. This is the same Peer Group Index as used in year
ending December 31, 1997.
EXECUTIVE EMPLOYMENT AGREEMENTS
Mr. Theodore H. Reich
In January 1995, the Corporation and the Bank entered into
an Employment Agreement with Theodore H. Reich, Director,
President and Chief Executive Officer of the Corporation and the
Bank. Under the terms of the Employment Agreement, Mr. Reich
will serve as President and Chief Executive Officer of the
Corporation. The initial term of the Employment Agreement is
three years, subject to an automatic one year extension on each
anniversary date thereof, unless either party gives notice to the
other of an intention not to renew. Under the Employment
Agreement that renewed in 1998, the Corporation or the Bank will
pay an annual base salary of $175,006 to the executive. This
base salary will be reviewed annually by the Board of Directors
and will be subject to annual adjustments. In addition, the
Board of Directors of the Corporation in its sole discretion
provide for the payment of periodic bonuses to the executive.
The Employment Agreement also provides for the payment of
severance benefits in the event of termination as result of
death, disability or without cause as defined in the Employment
Agreement by the Corporation or for Good Reason (as defined in
the Employment Agreement) by the executive. In the event of the
executive's termination as a result of his death, the Corporation
or the Bank will make a lump sum payment to his estate in an
amount equal to the highest of the base salaries paid to the
executive over the three calendar years preceding his termination
due to his death but in any event not less than $160,000. In the
event of his termination as a result of disability, the
Corporation or the Bank will pay to the executive annually an
amount equal to his base salary in effect immediately prior to
his termination because of a disability for a period of three
years beginning on the date of such termination. However,
payment of such amount will be reduced by the sum of any
benefits payable to the executive under any disability plan of
the Corporation or the Bank or under any government regulated
plan. In the event of the termination by the executive for Good
Reason (as defined in the Employment Agreement) or by the
Corporation or the Bank without cause, the executive will receive
annually for a period of three years following the date of
<PAGE 14> termination an amount equal to the highest of his base
salaries over the three years preceding the date of his
termination but in any event not less than $160,000 and an amount
equal to the average of the three highest annual base salaries
paid to the executive over the five years preceding the date of
his termination. The Employment Agreement also requires the
Corporation or the Bank to provide certain medical and health
benefits to the executive and his spouse following his
termination.
The Employment Agreement also contains a covenant which
restricts the ability of the executive to compete with the
Corporation for a period of three years following his termination
unless such termination was by the executive for Good Reason or
by the Corporation or the Bank for other than cause.
Mr. Ronald A. Walko
In August of 1991, Mr.Walko entered into an employment
agreement with the Bank, pursuant to which Mr. Walko agreed to
serve as Senior Vice President of Lending for the Bank. Under
the terms of the Employment Agreement, he will receive an annual
base salary of $95,420. The term of the Agreement was five
years, subject to automatic renewal after each successive five
year term. The Agreement was renewed in 1996 at the base salary
noted.
Under the current Employment Agreement, increases in
compensation will be determined in accordance with the annual
performance evaluation. Mr. Walko has the right to terminate
this agreement upon 60 days written notice to the Bank if he does
not receive an increase in compensation on each annual
anniversary date. The bank will also provide at its expense
Mr. Walko with an automobile for business purposes, annual
membership at the Ross Club or similar organization and all
benefits provided to other employees as set forth in the
Employee Handbook.
The Employment Agreement may be terminated by the Bank for
cause, as defined in the agreement, whereby the Bank shall pay
one-half the salary of Mr. Walko for the period of time between
the date of termination and the end of term of the agreement, or
the date Mr. Walko commences comparable employment on a full time
basis elsewhere, whichever occurs first. If the agreement is
terminated by the Bank without cause the Bank shall pay Mr. Walko
his full salary for the period of time between the date of
termination and the end of the term of the agreement, or the
date Mr. Walko commences comparable employment elsewhere on a
full time basis, whichever occurs first. If during the term of
the agreement, Mr.Walko dies or becomes disabled, Mr. Walko or
his estate shall be paid an amount equal to six months
compensation or the balance due on this contract, whichever is
less. If Mr. Walko terminates this agreement because he is
reduced to a lessor stature and authority, the Bank shall pay the
balance of all sums due under the contract up to the date of
<PAGE 15> termination. If Mr. Walko voluntarily terminates his
agreement for reasons other than changes in stature and
authority, he shall not work for another banking institution
having an office in Lycoming County, Pennsylvania for a one-year
period after the date of termination.
Severance Agreement
The Bank has entered into a severance agreement with
Mr. Walko. Under the terms of the agreement, if the executive
officer's employment is terminated within two years after a
Change in Control of the Corporation he will be entitled to
receive from the Corporation (i) his full compensation and
benefits from the Notice of Termination (as defined) until the
Date of Termination and (ii) a lump sum severance payment equal
to two times the annual average of salary plus bonuses earned by
him during the five calendar years preceding the Date of
Termination; such amount would be prorated, however, if the
termination occurs within two years of his 65th birthday. The
Agreement also provides the executive officer with insurance
coverage similar to those in effect immediately prior to the
Notice of Termination for a period of twenty-four months,
however, these will be reduced to the extent that comparable
benefits are received by him from another employer during the
corresponding period. In addition to the retirement benefits he
is entitled to receive under the Bank Pension Plan or any other
pension or retirement plan in which he participates, the
Corporation will pay him a lump sum equal to the actuarial
equivalent of the excess of the accrued retirement pension up to
the Date of Termination adjusted for an additional twenty-four
months of credited service at his compensation and the actual
accrued up to his Date of Termination (in no event will months of
age or service credit be accumulated after his 65th birthday).
During any period following a Change in Control of the
Corporation, if employment is terminated by the employer for
Disability, or by the employer or the employee by reason of
retirement or death, the benefits shall be determined in
accordance with the Corporation's programs then in effect. If
the employee is terminated by his employer for cause subsequent
to a Change in Control or is terminated by the employee for other
than Good Reason or retirement, he shall receive full
compensation through the date of termination and shall have no
further rights under this Agreement thereafter. This Agreement
will be in effect until Mr. Walko attains age 65 or until the
Date of Termination, whichever occurs first.
Mr. Hubert A. Valencik
In October 1984, Mr. Valencik entered into an employment
agreement with the Bank, pursuant to which Mr. Valencik agreed to
serve in the capacities as described by the Bank, at its
discretion. The term of the original agreement was five years,
subject to automatic renewal after each successive five year
term. The Agreement may be terminated by Mr. Valencik or the
<PAGE 16> Bank if written notice of the intent not to renew the
contract is provided to the other at least thirty days prior to
the end of the term. The Agreement was last renewed in 1994.
Under the terms of the Agreement, he will receive an annual base
salary of $66,092 subject to annual increases.
Under the current Employment Agreement, increases in
compensation will be determined in accordance with the annual
performance evaluation. The Bank will also provide to
Mr. Valencik, at its expense, an automobile for business
purposes, annual membership at the Clinton Country Club or
similar organization and all benefits provided to other employees
as set forth in the Employee Handbook. If at any time this
contract is not extended or renewed, the Bank shall at the time
of termination pay Mr. Valencik six times the total monthly
compensation being received by him at that time.
Severance Agreement
The Bank has entered into a severance agreement with
Mr. Valencik. Under the terms of the agreement, if the
executive officer's employment is terminated within two years
after a Change in Control of the Corporation he will be entitled
to receive from the Corporation (i) his full compensation and
benefits from the Notice of Termination (as defined) until the
Date of Termination and (ii) a lump sum severance payment equal
to two times the annual average of salary plus bonuses and other
sums shown as compensation on his Form W-2, (excluding amounts
that are attributable to stock options on the W-2) during the
sixty month period ending on the Date of Termination; such amount
would be prorated, however, if the termination occurs within two
years of his 65th birthday. The Agreement also provides the
executive officer with insurance coverage similar to those in
effect immediately prior to the Notice of Termination for a
period of twenty-four months, however, these will be reduced to
the extent that comparable benefits are received by him from
another employer during the corresponding period. In addition to
the retirement benefits he is entitled to receive under the Bank
Pension Plan or any other pension or retirement plan in which he
participates, the Corporation will pay him a lump sum equal to
the actuarial equivalent of the excess of the accrued retirement
pension up to the Date of Termination adjusted for an additional
twenty-four months of credited service at his compensation and
the actual accrued up to his Date of Termination (in no event
will months of age or service credit be accumulated after his
65th birthday).
During any period following a Change in Control of the
Corporation, if employment is terminated by the employer for
Disability, or by the employer or the employee by reason of
retirement or death, the benefits shall be determined in
accordance with the Corporation's programs then in effect. If
the employee is terminated by his employer for cause subsequent
to a Change in Control or is terminated by the employee for other
than Good Reason or retirement, he shall receive full <PAGE 17>
compensation and all fringe benefits he was entitled to through
the date of termination and shall have no further rights under
this Agreement thereafter.
This Agreement will be in effect until Mr. Valencik attains
age 65.
CERTAIN TRANSACTIONS
There have been no material transactions between the
Corporation and the Bank, nor any material transactions proposed,
with any Director or executive officer of the Corporation and the
Bank, or any associate of the foregoing persons. The Corporation
and the Bank have had, and intend to continue to have, banking
and financial transactions in the ordinary course of business
with Directors and Officers of the Corporation and the Bank and
their associates on comparable terms and with similar interest
rates as those prevailing from time to time for other customers
of the Corporation and the Bank.
Total loans outstanding from the Bank at December 31, 1998
to the Corporation's and the Bank's Officers and Directors as a
group and members of their immediate families and companies in
which they had an ownership interest of 10% or more was
$2,452,000 or approximately 7.5% of the total equity capital of
the Bank. 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 other persons, and did not
involve more than the normal risk of collectability or present
other unfavorable features.
LEGAL PROCEEDINGS
In the opinion of the management of the Corporation and the
Bank, there are no proceedings pending to which the Corporation
and the Bank are a party or to which their property is subject,
which, if determined adversely to the Corporation and the Bank,
would be material in relation to the Corporation's and the Bank's
undivided profits or financial condition. There are no
proceedings pending other than ordinary, routine litigation
incident to the business of the Corporation and the Bank. In
addition, no material proceedings are pending or are known to be
threatened or contemplated against the Corporation and the Bank
by the government authorities.
RATIFICATION OF INDEPENDENT AUDITORS
The Board of Directors of the Corporation has appointed the
firm of Parente, Randolph, Orlando, Carey & Associates, certified
public accountants (the "Auditors"), of Williamsport,
Pennsylvania, as the Corporation's independent auditors for its
1999 fiscal year. Such appointment is being submitted to
shareholders for ratification. Although the Board of Directors
is submitting the appointment of Parente, Randolph, Orlando,
<PAGE 18> Carey & Associates, the Board reserves the right to
request proposals from various qualified Certified Public
Accounting firms and to appoint Auditors to serve as the
Corporation's independent public accountants based upon the
submission of such proposals and approval by the Corporation's
Board of Directors.
The Auditors served as the Corporation's independent public
accountants for the 1998 fiscal year, assisted the Corporation
and the Bank with the preparation of their federal and state tax
returns and provided assistance in connection with regulatory
matters, charging the Bank for such services at its customary
hourly billing rates. The non-audit services were approved by
the Corporation's and the Bank's Board of Directors after due
consideration of the effect of the performance thereof on the
independence of the Auditors and after the conclusions by the
Corporation's and the Bank's Board of Directors that there was no
effect on the independence of the Auditors. The Corporation has
been advised by the Auditors that none of its members has any
financial interest in the Corporation.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR
RATIFICATION OF THE APPOINTMENT OF PARENTE, RANDOLPH, ORLANDO,
CAREY & ASSOCIATES AS THE CORPORATION'S INDEPENDENT AUDITORS FOR
THE 1999 FISCAL YEAR. The affirmative vote of a majority of all
votes cast at the Annual Meeting is required to ratify the
appointment. All proxies will be voted "FOR" ratification
appointment unless a shareholder specifies to the contrary on
such shareholder's proxy card.
ADDITIONAL INFORMATION REGARDING DIRECTORS AND OFFICERS
Section 16(a) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), requires the Corporation's Officers
and directors, and any persons owning ten percent or more of the
Corporation's Common Stock, to file in the personal capacities
initial statements of ownership, statements of changes in
ownership and annual statements of ownership with the Securities
and Exchange Commission (the "SEC"). Persons filing such
ownership statements are required by SEC regulation to furnish
the Corporation with copies of all such statements filed with the
SEC. The rules of the SEC regarding the filing of such
statements require that "late filings" be disclosed in the
Corporation's proxy statement. Based solely on the Corporation's
review of any copies of such statements received by it, the
Corporation believes that during 1998, Theodore H. Reich and
Hubert A. Valencik inadvertently neglected to file on a timely
basis, a statement on changes of ownership.
ANNUAL REPORT
A copy of the Corporation's Annual Report and Form 10-K for
its fiscal year ended December 31, 1998 is enclosed with this
Proxy Statement. A representative of Parente, Randolph, Orlando,
Carey & Associates, the accounting firm which examined the
<PAGE 19> financial statements in the Annual Report, will attend
the Annual Meeting. This representative will have the
opportunity to make a statement, if he desires to do so, and will
be available to respond to any appropriate questions presented by
shareholders at the Annual Meeting.
SHAREHOLDER PROPOSALS
Securities and Exchange Commission Regulations permit
shareholders to submit proposals for consideration at Annual
Meetings of Shareholders. Any such proposals for the
Corporation's Annual Meeting of Shareholders to be held in 2000,
must be submitted in writing to the President of Penns Woods
Bancorp, Inc. at its principal executive office, 300 Market
Street, P.O. Box 967, Williamsport, PA 17703-0967, on or before
November 24, 1999, and must comply with applicable regulations of
the SEC in order to be included in proxy materials relating to
that Meeting.
OTHER MATTERS
The Board of Directors of the Corporation is not aware that
any other matters are to be presented for action, other than the
matters described in the accompanying Notice of Annual Meeting of
Shareholders, but if any other matters properly come before the
Meeting, or any adjournments thereof, the holder(s) of any Proxy
is (are) authorized to vote thereon at their discretion.
ADDITIONAL INFORMATION
UPON WRITTEN REQUEST OF ANY SHAREHOLDER, A COPY OF THE
CORPORATION'S REPORT ON FORM 10-K FOR ITS FISCAL YEAR ENDED
December 31, 1998, INCLUDING THE FINANCIAL STATEMENTS AND THE
SCHEDULES THERETO, REQUIRED TO BE FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 13a-1 UNDER THE SECURITIES
EXCHANGE ACT OF 1934, AS AMENDED, MAY BE OBTAINED, WITHOUT
CHARGE, FROM THEODORE H. REICH, PRESIDENT, PENNS WOODS BANCORP,
INC.
By Order of the Board of Directors
Theodore H. Reich
President and
Chief Executive Officer
Dated: March 25, 1999 <PAGE 20>
