Penns Woods Bancorp, Inc. Amends CEO Grafmyre Contract

Rhea-AI Summary

Penns Woods Bancorp (NASDAQ:PWOD) has amended the employment agreement of CEO Richard A. Grafmyre, effective June 3, 2024. The key changes involve removing compensation for unused paid time off, reducing Grafmyre’s base salary to $850,000, and capping his annual bonus at $325,000. These modifications will reduce his maximum total annual compensation by about $150,000, aligning it more closely with industry norms and shareholder feedback. New bonus metrics for 2024 include return on average equity, return on average assets, earnings per share, asset growth, and credit quality. These changes aim to better align executive compensation with performance.

Positive

• CEO base salary reduced to $850,000, saving $150,000 annually.
• New bonus metrics emphasize return on average equity, return on average assets, EPS, asset growth, and credit quality.
• Historical focus on tangible book value plus dividend growth (139% vs. peer 124% from Dec 31, 2013 to 2023).
• Loan portfolio growth of $455 million from Dec 31, 2018 to 2023.
• Low cumulative net charge-offs to average loans of 0.5% vs. all banks' 2.1% (Dec 31, 2018 to 2023).

Negative

• CEO's total annual compensation is reduced by $150,000, which might affect executive morale.
• Performance-based compensation introduces higher risks for the CEO, potentially leading to management instability.

WILLIAMSPORT, Pa., June 04, 2024 (GLOBE NEWSWIRE) -- Penns Woods Bancorp, Inc. (NASDAQ:PWOD) announced today that a mutual agreement has been reached with its Chief Executive Officer, Richard A. Grafmyre CFP®, to amend Mr. Grafmyre’s employment agreement. The amendment was agreed upon after conducting a review of reported compensation data for the Company’s peer group, industry compensation analysis, and discussions with shareholders. The amendment, effective June 3, 2024 removes the provision for Mr. Grafmyre to be compensated for unused paid time off (beginning with paid time off earned during the 2024 annual period), reduces Mr. Grafmyre’s base salary to $850,000, and sets his maximum annual potential bonus amount at $325,000. These changes will reduce the maximum total annual compensation for Mr. Grafmyre by approximately $150,000 and will place a greater emphasis on at-risk compensation to better reflect the changes being seen within the Company’s peer group.  

The Company’s bonus plan has been revised to incorporate the following metrics for the 2024 period: return on average equity, return on average assets, earnings per share, asset growth, and credit quality (net charge-offs as a percentage of average loans). As with the changes to Mr. Grafmyre’s compensation, these changes are the result of a review of peer and industry practices and feedback received from shareholders. The bonus metrics will complement the historical and continued focus on tangible book value plus dividend growth (139% versus peer 124% from December 31, 2013 to 2023), loan portfolio growth ($455 million from December 31, 2018 to 2023), and credit quality (cumulative net charge-offs to average loans of 0.5% versus all banks 2.1% for the period of December 31, 2018 to 2023).

The Company’s Board of Directors believes the employment agreement amendment and the revised bonus plan metrics will more closely align compensation to performance while incorporating peer and industry standards with a greater percentage of total compensation considered at-risk. Executive compensation and the bonus plan metrics and design will continue to be reviewed annually.

About Penns Woods Bancorp, Inc.
Penns Woods Bancorp, Inc. is the bank holding company for Jersey Shore State Bank and Luzerne Bank. The banks serve customers in North Central and North Eastern Pennsylvania through their retail banking, commercial banking, mortgage services and financial services divisions. Penns Woods Bancorp, Inc. stock is listed on the NASDAQ National Market under the symbol PWOD.

Previous press releases and additional information can be obtained from the company’s website at www.pwod.com. 

Contact:	Richard A. Grafmyre, Chief Executive Officer
	300 Market Street, Williamsport, PA, 17701
	(570) 322-1111
	(888) 412-5772
	pwod@pwod.com
	www.pwod.com

FAQ

What changes have been made to the CEO's compensation at Penns Woods Bancorp in 2024?

The CEO's base salary has been reduced to $850,000, and the annual bonus is capped at $325,000.

What new metrics are included in the 2024 bonus plan for Penns Woods Bancorp?

The new bonus metrics include return on average equity, return on average assets, earnings per share, asset growth, and credit quality.

How much will the CEO's maximum total annual compensation be reduced by with the new agreement?

The CEO's maximum total annual compensation will be reduced by approximately $150,000.

What historical performance metrics does Penns Woods Bancorp highlight in the press release?

The company highlights tangible book value plus dividend growth, loan portfolio growth, and low cumulative net charge-offs to average loans.

Why did Penns Woods Bancorp amend the CEO's employment agreement?

The amendment was made following a review of peer and industry compensation data and feedback from shareholders.