PENNS WOODS BANCORP, INC.
Corporate Headquarters
115 South Main Street
Jersey Shore, PA 17740
Theodore H. Reich
Chairman and
President
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 26, 2000
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 26, 2000, at 1:00 P.M.,
for the following purposes:
1. To elect four (4) Class 2 Directors, to serve for a
three-year term that will expire in 2003, and until their
successors are elected and qualified.
2. To ratify the appointment by the Corporation's Board of
Directors of S. R. Snodgrass of Wexford, Pennsylvania,
Certified Public Accountants as the independent auditors for the
Corporation for the year ending December 31, 2000; 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 7,
2000,shall be entitled to notice of and to vote at the Annual
Meeting and any adjournment or postponement thereof.
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
Chairman and
President
Dated: March 24, 2000
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 26, 2000
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 26,
2000, at 1:00 P.M., at the Williamsport Branch Office of
Jersey Shore State Bank (the "Bank"), 300 Market Street,
Williamsport, PA 17703-0967, 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 7, 2000, will be
entitled to notice of and to vote at the Annual Meeting. On
March 7, 2000 there were 3,125,384 shares of common stock
issued and outstanding. Each share of the common stock
outstanding as of the close of business on March 7, 2000, 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 four 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 shareholder's at the Annual
Meeting is required for the ratification of the independent
auditors. Abstentions and broker non- votes will not
constitute or be counted as votes cast and therefore will not
affect the vote on 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 29, 2000. 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 2 nominees noted, and "FOR" the ratification of the
appointment of S. R. Snodgrass, Certified Public Accountants,
as the independent auditors of the Corporation for the year
ending December 31, 2000. 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. Scott, 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.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
PRINCIPAL OWNERS
As of March 7, 2000, 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 7, 2000, 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
Executive Officers as a group.The following table also sets forth
the name, address, principal occupation and certain additional
information regarding each Director.
<TABLE>
<S> <C> <C> <C> <C> <C>
Principal Number of
Occupation Shares Percentage
Name and for Past AffiliateBenefically of
Address (1) Five Years(2) Age Since (3)Owned (4) Class
Phillip H. Bower Owner, 66 1989 600(I) 1.44%
Turbotville, PA Central Equipment Co. (1989) 37,905(J)
Class 2 (C) (Equipment Rental) 6,084(BI)
525(BI)
Lynn S. Bowes Farmer 62 1983 15,587(I) 1.97%
Jersey Shore, PA (1974) 41,522(J)
Class 3 (B) 4073(BI)
525(BI)
Michael J. Casale, Jr. Partner in the Law 48 1999 5,400(J) 0.30%
Williamsport, PA Firm of Casale & Bonner PC (1999) 3,794(BI)
Class 1 (A) 250(BI)
H. Thomas Davis, Jr. President and 51 1999 8,954(I) 0.29%
Lock Haven, PA Chief Executive Officer (1999) 250(BI)
Class 3 (B) of Franklin Ins. Co. Inc
William S. Frazier Owner, 68 1983 24,338(I) 2.39%
Jersey Shore, PA Shore Auto Parts, Inc (1980) 31,459(J)
Class 3 (B) 18,348(BI)
525(BI)
James M. Furey, II President & 52 1990 3,514(I) 0.25%
Cogan Station, PA General Manager (1990) 3,480(J)
Class 2 (C) Eastern Wood Products 440(BI)
(Hardwood Lumber Products) 525(BI)
Allan W. Lugg Partner in the 71 1995 21,056(I) 0.69%
Flemington, PA Law Firm of (1995) 525(BI)
Class 1 (A) Lugg & Lugg
Jay H. McCormick President and Owner 62 1983 16,133(I) 0.64%
Williamsport, PA J.H.M. Enterprises, Inc. (1974) 3,303(BI)
Class 3 (B) (Trucking Company) 525(BI)
R. Edward Nestlerode, Jr. Vice President 47 1995 2,855(I) 0.23%
Lock Haven, PA Nestlerode Contracting (1995) 3,017(J)
Class 1 (A) Co., Inc. 842(BI)
525(BI)
James E. Plummer Secretary of the 57 1995 7,830(I) 1.06%
Lock Haven, PA Bank; (1995) 23,746(J)
Class 2 (C) Retired , Former President of 1,188(BI)
Lock Haven Savings Bank 525(BI)
Theodore H. Reich(5) Chairman & President 61 1983 38,005(I) 1.88%
Jersey Shore, PA of the Bank (1973) 4,985(J)
Class 2 (C) & the Corporation 9,367(BI)
6,590(BI)
William H. Rockey Senior Vice President 53 1999 22,584(J) 0.73%
Centre Hall, PA of the Bank; (1999) 250(BI)
Class 1 (A) Senior Vice President
of the Corporation;
Former President of First
National Bank of Spring Mills
Hubert A. Valencik Senior Vice President 58 1984 7,816(I) 0.36%
Jersey Shore, PA and Operations Officer 1,009(J)
of the Bank; 2,400(BI)
Senior Vice President
of the Corporation
Ronald A. Walko Executive Vice President 53 1986 330(I) 0.34%
Montoursville, PA and Chief Executive 4,862(J)
Officer of the Bank; 517(BI)
and the Corporation 5,125(BI)
</TABLE>
All Executive Officers and Directors as a Group(D) 399,179 12.64%
*(I) Individual Ownership (J) Joint Ownership (BI) Beneficial Interest
(A) A Director whose term expires in 2001.
(B) A Director whose term expires in 2002.
(C) A Nominee for Class 2 Director whose term, if elected at
the Annual meeting will expire in 2003.
(D) Executive Officers of the Corporation include Sonya E.
Scott, 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 7, 2000, 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 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 7, 2000. 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 - Little League Baseball,
Incorporated.
THE BOARD OF DIRECTORS AND ITS COMMITTEES
The Corporation appointed the following committees for 1999:
<TABLE>
<CAPTION>
<S> <C> <C>
Number of Number of Times
Times Met During 1999 Met During 1999
AUDIT: Lynn S. Bowes, James M. Furey, II, Jay H. McCormick, 0
R. Edward Nestlerode, Jr., James E. Plummer and
Michael J. Casale, Jr.
BUILDING: Lynn S. Bowes, Phillip H. Bower, Allan W. Lugg 0
and William H. Rockey
The Bank appointed the following committees for 1999:
AUDIT: Lynn S. Bowes, James M. Furey, II, Jay H. McCormick 3
R. Edward Nestlerode, Jr., James E. Plummer
and Michael J. Casale, Jr.
BUILDING: Lynn S. Bowes, Phillip H. Bower, Allan W. Lugg, 0
and William H. Rockey
RETIREMENT: Phillip H. Bower, William S. Frazier, Allan W. Lugg, 0
Jay H. McCormick and R. Edward Nestlerode, Jr.
INSURANCE: William S. Frazier, James E. Plummer, James M. Furey, II 1
William H. Rockey and H.Thomas Davis, Jr.
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., James E. Plummer,
Michael J. Casale, Jr. and H. Thomas Davis, Jr.
ASSET LIABILITY: Lynn S. Bowes, William S. Frazier, Allan W. Lugg, 3
Sonya E. Scott, Theodore H. Reich, Hubert A. Valencik,
Ronald A. Walko, William P. Young, Robert J. Glunk,
Michael J. Casale, Jr. and H. Thomas Davis, Jr.
</TABLE>
The Board of Directors of the Corporation met eleven (11)
times during 1999. The Board of Directors of the Bank met
twenty-six (26) times during 1999. 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
ofthe nominating committee. In determining its nominees for
election to the Board, the Board of Directors will consider
nominees recommended by shareholders. Such shareholder
recommendations for 2001 shall be made in writing no later
than January 1, 2001, 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 7, 2000:
<TABLE>
<S> <C> <C> <C> <C> <C>
Bank Number of Year First
Position and/or Office Employee Shares of Elected as
Name Age With the Corporation Since Corporation Officer
Theodore H. Reich 61 Chairman & President 1970 58,947 1983
Ronald A. Walko 53 Executive Vice President 1986 10,834 1987
& Chief Executive Officer
Hubert A. Valencik 58 Senior Vice President 1984 11,225 1985
Sonya E. Scott 40 Secretary 1981 5,171 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 twelve (12). 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:
Class 1 Directors to serve until 2001:
Allan W. Lugg
Michael J. Casale, Jr.
R. Edward Nestlerode, Jr.
William H. Rockey
Nominees for election as Class 2 Directors whose term expires in 2003:
Phillip H. Bower
James M. Furey, II
James E. Plummer
Theodore H. Reich
Class 3 Directors whose term expires in 2002:
Lynn S. Bowes
H. Thomas Davis, Jr.
William S. Frazier
Jay H. McCormick
It is intended that the Proxies solicited hereunder will be
voted FOR (unless otherwise directed) the four (4) nominees
listed previously for election as Class 2 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 and other such persons selected by the Board of
Directors,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, 1999 for those persons
who were as of December 31,1999, Named Executives, (i) the
Chief Executive Officer and (ii) the only other Executive
Officers whose total annual salary and bonus exceeded
$100,000:
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION Long Term Compensation
AWARDS PAYOUTS
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Securities
Name Other RestrictedUnderlying
and Annual Stock Options/ LTIP All Other
Principal Salary Bonus CompensationAward(s) SAR's Payouts Compensation
Position Year ($) (1) ($) ($) (2) ($) (#) (3) ($) ($)
Theodore H. Reich 1999 $166,618 $31,126 $0 $0 1,000 $0 $6,148(4)
Chairman (6) 1998 $186,606 $107,231 $0 $0 990 $0 $6,148
1997 $169,204 $200,500 $0 $0 6,600 $0 $5,939
Ronald A. Walko 1999 $135,208 $41,126 $0 $0 1,000 $0 $3,553(5)
Chief Executive 1998 $109,473 $34,807 $0 $0 825 $0 $2,890
Officer (7) 1997 $100,828 $25,500 $0 $0 3,300 $0 $2,604
Hubert A. Valencik 1999 $87,230 $18,855 $0 $0 750 $0 $2,175(5)
Senior Vice 1998 $83,174 $18,699 $0 $0 550 $0 $2,037
President(8) 1997 $78,286 $13,511 $0 $0 1,100 $0 $1,836
</TABLE>
(1) Total includes base salary and director's fees for Mr.
Reich and base salary for Mr. Walko and Mr. Valencik.
Directors fees paid to Mr. Reich were $9,300, $11,600 and
$9,200 in 1999, 1998 and 1997, respectively. A retainer fee
of $2,500 is included in the directors fee total for 1999 and
$2,000 for 1998 and 1997. The 1999 base salary shown for Mr.
Reich and Mr. Walko reflects the changes indicated in (6) and
(7) below.
(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 1998 and 1997 have been
adjusted for the 10% stock dividend issued on June 8, 1999
and the 100% stock dividend issued on January 15, 1998.
(4) Indicates contributions paid in 1999, 1998, and 1997 in
the amount of $3,376, $3,376, 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 $2,772 for each year
indicated.
(5) Indicates contributions paid by the Bank to the Bank's
401(k) Plan for the benefit of Mr. Walko and Mr. Valencik.
(6) Mr. Reich serves as both Chairman and President of the
Corporation and the Bank and is a member of the Board of
Directors of the Corporation and the Bank. Mr. Reich served
as Chief Executive Officer until May 20, 1999.
(7) Mr. Walko has served as Chief Executive Officer and
Executive Vice President of the Corporation and the Bank
since May 20, 1999. Mr. Walko served as Vice President of the
Corporation and as Senior Vice President and Senior Loan
Officer of the Bank prior to becoming CEO.
(8) Mr. Valencik serves as Senior Vice President of the Corporation
and as Senior Vice President & Operations Officer of the Bank.
OPTION/SAR GRANTS
The following table sets forth information concerning grants
of stock options to the Chief Executive Officer of the
Corporation, and the other Named Executives during the fiscal
year ended December 31, 1999.
<TABLE>
<CAPTION>
OPTION/SAR GRANTS IN LAST FISCAL YEAR (1)
Potential Realizable
Value at Assumed
Annual Rates of
Stock Price
Appreciation
Individual Grants for Option Term(2)
<S> <C> <C> <C> <C> <C> <C> <C>
Number of % of Total
Securities Options/
Underlying SARs
Options/ Granted to Exercise Market
SARs Employees or Base Price at
Granted in Fiscal Price Grant Expiration
Name (#) Year ($/Sh) Date Date 5% ($) 10% ($)
Theodore H. Reich 1,000 9.57% $42.00 $42.00 12/21/09 $26,414 $66,937
Ronald A. Walko 1,000 9.57% $42.00 $42.00 12/21/09 $26,414 $66,937
Hubert A. Valencik 750 7.18% $42.00 $42.00 12/21/09 $19,810 $50,203
fn>
(1)All amounts represent stock options. No SARs or SARs
granted in tandem with stock options were granted to the
Named Executives during the three years ended December 31,
1999. Options were granted by the Corporation to Messrs.
Reich, Walko and Valencik pursuant to Stock Option
Agreements by and between the Corporation and Messrs. Reich,
Walko, and Valencik. All options granted under the agreements
represent incentive stock options. The options are
exercisable for a period of ten years from the date of the
grant.
(2) The dollar amounts set forth are the result of
calculations made at the 5% and 10% appreciation rates set
forth in Securities and Exchange Commission regulations and
are not intended to indicate future price appreciation, if
any, of the Corporation's Common Stock. </TABLE>
The following table sets forth information concerning the
exercise of options to purchase Common Stock by the Named
Executives during the fiscal year ended December 31, 1999, as
well as the number of securities underlying unexercised
options and the potential value of unexercised options (both
options which are presently exercisable and options which are
not presently exercisable) as of December 31, 1999.
<TABLE>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION/SAR VALUES
<S> <C> <C> <C> <C>
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options/SARs Options/SARs at
Shares Value at FY-End (#) FY-End ($)
Acquired on Realized Exercisable/ Exercisable/
Name Exercise (#) ($) Unexercisable (1) Unexercisable (2)
Theodore H. Reich 0 - 7,590/1,000 $79,502/$0.00
Ronald A. Walko 2,090 $56,618 4,125/1,000 $35,400/$0.00
Hubert A. Valencik 550 $14,900 1,650/750 $8,176/$0.00
</TABLE>
1) All amounts represent stock options. No SARs or SARs
granted in tandem with stock options were either exercised
during 1999 or outstanding at fiscal year-end 1999.
(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, 1999. 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, 1999.
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 1999 are set
forth below.
Final Five Years Total Projected Years of Service
Average Annual Compensation 15 20 30 35
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 9,025 12,033 18,049 21,057
50,000 12,025 16,033 24,049 28,057
60,000 15,025 20,033 30,046 35,057
70,000 18,025 24,033 36,049 42,057
80,000 21,025 28,033 42,049 49,057
90,000 24,025 32,033 48,049 56,057
100,000 27,025 36,033 54,049 63,057
125,000 34,525 46,033 69,049 80,557
160,000 * 45,025 60,033 90,049 105,057
175,000 45,025 60,033 90,049 105,057
200,000 45,025 60,033 90,049 105,057
225,000 45,025 60,033 90,049 105,057
250,000 45,025 60,033 90,049 105,057
*Compensation for the purpose of calculating benefits is
limited by the Internal Revenue Code to $160,000.
The estimated annual benefits payable upon retirement
at normal retirement age to Theodore H. Reich
for the fiscal year 1999 is $95,719, to Mr. Walko is
$48,293 and to Mr. Valencik is $29,866. As of December 31,
1999, Mr. Reich was credited with twenty-seven years of
service, Mr. Walko was credited with twelve years of service
and Mr. Valencik was credited with fourteen years of service.
The number of Plan Participants in 1999 was 138. Total plan
assets as of December 31, 1999 were $3,640,460.
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 $2,500 retainer fee
was also paid to each Director of the Corporation during
1999. 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 $118,460.00 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
fees earned 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
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 ten 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 President, a senior
vice president and the controller. 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 has set the 1999 base compensation
for Mr. Theodore H. Reich, at $146,263 based upon an
Executive Employment Agreement that was adopted in January 1995.
The base compensation for Mr. Ronald A. Walko has also been set
at $146,263 based upon an Executive Employment Agreement that
was adopted in August 1991. The base compensations were
adjusted in May 1999, from $175,006 to $146,263 for
Mr. Reich, and from $117,520 to $146,263 for Mr. Walko, when
Mr. Reich was named Chairman and Mr. Walko became Chief Executive
Officer. The base compensation for Mr. Hubert A. Valencik was
determined to be $87,230 based upon an Executive 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.
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
Michael J. Casale, Jr. H. Thomas Davis, Jr.
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,
1994 and ending December 31, 1999. 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>
<S> <C> <C> <C> <C> <C> <C>
1994 1995 1996 1997 1998 1999
S & P 500 $100.00 $137.44 $168.92 $225.20 $286.82 $346.71
Peer Group $100.00 $107.91 $119.08 $167.36 $195.85 $156.29
Penns Woods Bancorp, Inc. $100.00 $117.13 $145.11 $232.41 $419.95 $329.48
</TABLE>
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, 1998.
EXECUTIVE EMPLOYMENT AND SEVERANCE AGREEMENTS
Mr. Theodore H. Reich
In January 1995, the Corporation and the Bank entered into an
Employment Agreement with Theodore H. Reich. 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 renewed in 1998, the Corporation or
the Bank would pay an annual base salary of $146,263 to the
executive. Mr. Reich's annual base salary was adjusted from
$175,006 to $146,263 in May of 1999, when Mr. Reich was named
Chairman. The 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 severence 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
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. Under the terms of the
Employment Agreement, he will receive an annual base
salary of $146,263. Mr. Walko's annual base salary was
adjusted from $117,520 to $146,263, when Mr. Walko became
Executive Vice President and Chief Executive officer. The
term of the Agreement was five years, subject to
automatic renewal after each successive five year term.
The Agreement was renewed in 1996.
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
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.
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 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 1999. Under the terms of the Agreement, he
will receive an annual base salary of $87,230 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.
The Bank has also 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 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, 1999 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
$5,810,000 or approximately 17.47% 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 S. R. Snodgrass, certified public accountants (the
'Auditors"), of Wexford, Pennsylvania, as the Corporation's
independent auditors for its 2000 fiscal year. Such
appointment is being submitted to share- holders for
ratification.
On July 27, 1999, the Board of Directors, upon the
recommendation of its audit committee, engaged the accounting
firm of S.R. Snodgrass, A.C. as independent accountants to
audit the Corporation's financial statements for the fiscal
year ended December 31, 1999. Concurrently with the engagement
of S.R. Snodgrass, the Board of Directors dismissed Parente,
Randolph, Carey & Associates ("Parente") as the Company's
independent auditors. During the fiscal years ended December
31, 1997 and 1998, there were no disagreements with Parente
on any matter of accounting principles or practice, financial
statement disclosure, or auditing scope or procedure or any
reportable event. The reports on the financial statements of
the Company for such years issued by Parente did not contain
an adverse opinion or a disclaimer of opinion, and were not
qualified or modified as to uncertainty, audit scope, or
accounting principles.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR
RATIFICATION FOR THE APPOINTMENT OF S. R. SNODGRASS AS THE
CORPORATION'S INDEPENDENT AUDITORS FOR THE 2000 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 1999 there were no "late filings" to be disclosed
in the Corporation's proxy statement.
ANNUAL REPORT
A copy of the Corporation's Annual Report and Form 10-K for
its fiscal year ended December 31, 1999 is enclosed with this
Proxy Statement. A representative of S. R. Snodgrass, the
accounting firm which examined the 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
2001, must be submitted in writing to the President of Penns
Woods Bancorp, Inc. at its principal executive office, 300
Market Street, PO Box 967, Williamsport, PA 17703-0967, on
or before November 24, 2000, 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, 1999, 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
Chairman and
President
Dated: March 24, 2000
