Penns Woods Bancorp : 2024 Proxy Report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

(Rule 14a-101)

INFORMATION REQUIRED IN PROXY STATEMENT

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PENNS WOODS BANCORP, INC.

(Name of Registrant as Specified In Its Charter)

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PENNS WOODS BANCORP, INC.

300 Market Street

Williamsport, PA 17701

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS

To Our Shareholders:

The Annual Meeting of Shareholders of Penns Woods Bancorp, Inc. (the "Corporation") will be held on Tuesday, May 7, 2024 at 9:00 A.M. The 2024 Annual Meeting will be held virtually via the Internet, and shareholders can access the Meeting and vote and submit questions by visiting www.meetnow.global/MQMXHTA. Only shareholders of record at the close of business on March 1, 2024 are entitled to notice of and to vote at the Annual Meeting and any adjournment or postponement thereof.

At the 2024 Annual Meeting we will:

1. Elect four (4) Class 2 director nominees of the board of directors, to serve for a three-year term that will expire in 2027, and until their successors are elected and qualified (Proposal No. 1);
2. Ratify the appointment of S.R. Snodgrass, P.C. as the Corporation's independent registered public accounting firm for the year ending December 31, 2024 (Proposal No. 2); and
3. Transact such other business as may properly come before the Annual Meeting, and any adjournment or postponement thereof.

The board of directors recommends that you vote "FOR" each of the nominees of the board of directors in Proposal 1 and "FOR" Proposal 2.

You are urged to vote your shares by using the Internet at http://www.investorvote.com/pwod or by telephone by calling 1-800-652-8683(toll-free) on a touch- tone phone and using the control number located on the proxy card. You may also vote your shares by promptly returning your proxy card (marked, signed, and dated) in the enclosed postage-paid envelope. Finally, you may vote at the Annual Meeting by following the instructions at www.meetnow.global/MQMXHTA. The voting of your shares will help in assuring the presence of a quorum. The prompt voting of your shares by Internet, phone, or the return of your proxy card, regardless of the number of shares you hold, will aid the Corporation in reducing the expense of additional proxy solicitation. If your shares are registered in the name of a broker or other nominee, your nominee may be participating in a program provided through Broadridge Corporate Issuer Solutions that allows you to vote via the Internet. If so, the voting form your nominee sends you will provide voting instructions.

You may access the following proxy materials at http://www.edocumentview.com/pwod:

• Notice of the 2024 Annual Meeting of Shareholders;
• 2024 Proxy Statement;
• Annual Report to Shareholders for the year ended December 31, 2023; and
• Proxy Card.

You are encouraged to attend the virtual Annual Meeting at www.meetnow.global/MQMXHTA and the control number found on your proxy card.

You may vote during the Annual Meeting by following the instructions available on the meeting website during the meeting.

By Order of the Board of Directors,

Richard A. Grafmyre

Chief Executive Officer

Dated: March 25, 2024

Important Notice Regarding Availability of Proxy Materials for the

Annual Meeting of Shareholders to be held on Tuesday, May 7, 2024

The Proxy Statement and Annual Report to Shareholders for the year ended

December 31, 2023 are available at http://www.edocumentview.com/pwod.

auditors. The Audit Committee also assists the board of directors in providing oversight over the integrity of the Corporation's financial statements, compliance with applicable legal and regulatory requirements, and the performance of our internal audit function. The Audit Committee also is responsible for, among other things, reporting to the board of directors on the results of the annual audit and reviewing the financial statements and related financial and non-financial disclosures included in our Annual Report on Form 10-K and Quarterly Reports on Form 10-Q. Importantly, from a corporate governance perspective, the Audit Committee regularly evaluates the independent auditors' independence, including approving consulting and other legally permitted, non-audit services provided by the auditors and the potential impact of the services on the auditors' independence. The Audit Committee meets periodically with the independent auditors and the internal auditors outside of the presence of management, and possesses the authority to retain professionals to assist it in meeting its responsibilities without consulting with management. The Audit Committee reviews and discusses earnings releases with management, including the use of pro-forma information. The Audit Committee also discusses with management and the independent auditors the effect of accounting initiatives. The Audit Committee also is responsible for receiving and retaining complaints and concerns relating to accounting and auditing matters.

Board Meetings

The board of directors of the Corporation met eighteen (18) times during 2023. All directors attended at least 80% of the aggregate of all meetings of the board of directors and the committees of which they were members.

Board Leadership Structure

Our board of directors maintains the freedom to choose whether the roles of Chairman of the Board and Chief Executive Officer should be combined or separated, based on what it believes is best for the Corporation and its shareholders at any given time. The board of directors has determined that it is appropriate to separate the roles of Chief Executive Officer and Chairman of the Board. Accordingly, R. Edward Nestlerode, Jr. serves as Chairman of the Board of the Corporation while Richard A. Grafmyre serves as Chief Executive Officer of the Corporation. The board of directors believes this arrangement provides stronger corporate governance and conforms to industry best practices.

Board Risk Oversight

Each member of the board of directors has a responsibility to monitor and manage risks faced by the Corporation. At a minimum, this requires the members of the board of directors to be actively engaged in board discussions, review materials provided to them, and know when it is appropriate to request further information from management and/or engage the assistance of outside advisors. Furthermore, because the banking industry is highly regulated, certain risks to the Corporation are monitored by the board of directors through its review of the Corporation's and its banking subsidiaries' compliance with regulations set forth by the banking regulatory authorities. Because risk oversight is a responsibility for each member of the board of directors, the board's responsibility for risk oversight is not concentrated into a single committee. Instead, oversight is delegated, to a large degree, to the various board committees with an independent director serving in the capacity of committee chairman. These committees meet formally, as needed, to discuss risks and monitor specific areas of the Corporation's performance with their findings reported at the next scheduled full meeting of the board of directors. In addition, the composition of the board of directors and normal agenda allow for the continuous oversight of risk by providing an environment which encourages the directors to ask specific questions or raise concerns and allots them sufficient time and materials to do so effectively. The overlap of committee membership provides a broad perspective of various risks and the actions undertaken to manage risks in today's environment.

Nominating and Corporate Governance Committee

The Nominating and Corporate Governance Committee operates under a written charter, a copy of which is available on our website, www.pwod.com, under Financial Information/Governance Documents and is available upon request to the President or the Chief Executive Officer. All members of the Committee are independent within the meaning of Nasdaq listing standards, and the Committee met once during 2023. The Committee will consider candidates recommended by shareholders. Shareholders desiring to submit a candidate for consideration as a nominee of the board of directors must submit the same information with regard to the candidate as required to be included in the Corporation's proxy statement with respect to nominees of the board of directors in addition to any information required by the bylaws of the Corporation. Shareholder recommendations should be submitted in writing to Penns Woods Bancorp, Inc., 300 Market Street, Williamsport, PA 17701 (Attention: Chief Executive Officer), on or before December 31 of the year preceding the year in which the shareholder desires the candidate to be considered as a nominee. Although the board of directors at this time does not utilize any specific written qualifications, guidelines, or policies in connection with the selection of director nominees, candidates must have a general understanding of the financial services industry or otherwise be able to provide some form of benefit to the Corporation's business, possess the skills and capacity necessary to provide strategic direction to the Corporation, be willing to represent the interests of all shareholders, be able to work in a collegial board environment, and be available to devote the necessary time to the business of the Corporation. In addition to these requirements, candidates will be considered on the basis of diversity of experience, skills, qualifications, occupations, education, and backgrounds, and whether the candidate's skills and experience

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are complementary to the skills and experience of other board members. Candidates recommended by shareholders will be evaluated on the same basis as candidates recommended by the independent directors.

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 less than ninety (90) days or more than one hundred fifty (150) days prior to 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 that 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.

Restrictions on Hedging and Pledging Corporation Securities

The Corporation believes that stock ownership can effectively align the interests of directors, officers, and employees with the long-term interests of shareholders. Certain transactions in the Corporation's securities, however, may be considered short-term or speculative in nature, or create the appearance that incentives are not properly aligned with the long-term interests of shareholders. It is the Corporation's policy that directors, officers, and employees not purchase financial investments (including equity swaps, collars and similar derivative securities) or otherwise engage in transactions that hedge or offset, or are designed to hedge or offset, any potential decrease in the market value of the Corporation's securities. As a result, under the Corporation's Policy on Material Nonpublic Information and Personal Investing for Directors, Officers, and Employees, directors and specified officers, including all executive officers, may not buy or sell puts or calls or other derivative securities relating to the Corporation's securities; directors and specified officers, including all executive officers, may not hold the Corporation's securities in a margin account or pledge Corporation securities as collateral for a loan; and directors, officers, and employees may not enter into hedging or monetization transactions or similar arrangements with respect to Corporation securities that hedge or offset, or are designed to hedge or offset, any potential decrease in the market value of Corporation securities.

Clawback Policy

On November 28, 2023, the board of directors approved the adoption of a Clawback Policy, which covers incentive compensation paid on or after October 2, 2023 to current or former executive officers of the Corporation. The Clawback Policy complies with the final clawback rules adopted by the SEC under Section 10D of the Securities Exchange Act of 1934 and Nasdaq listing standards set forth in the Nasdaq Listing Rule 5608. The Clawback Policy provides for the mandatory recovery of erroneously awarded incentive-based compensation from current and former executive officers (as defined in SEC Rule 10D-1) of the Corporation in the event that the Corporation is required to prepare an accounting restatement. Under the Clawback Policy, the Corporation is required to recoup from the covered executive officers erroneously awarded incentive compensation received within a recovery period of the three completed fiscal years preceding the date on which the Company is required to prepare an accounting restatement.

Other Significant Corporate and Governance Practices

The following describes certain additional corporate, community, and governance practices of the Corporation and its affiliated companies.

Succession

The board of directors has focused on succession planning over the past several years, from the Chief Executive Officer position down through senior management levels at the Corporation and its subsidiary banks and affiliated companies. Emphasis has been at the senior management levels, and the process has taken into account, and will continue to take into account, the challenges and opportunities posed by the economic environment. As a result of these considerations and discussions, in December 2023 the board of directors and Chief Executive Officer Grafmyre executed an amendment to Mr. Grafmyre's employment agreement under which he will continue as Chief Executive Officer of the Corporation on a full-time basis through April 30, 2028. At that time, the contract can renew for three successive one-year periods unless either the Corporation or Mr. Grafmyre decides to terminate the agreement prior to commencement of an annual renewal date. The amended agreement will ensure Mr. Grafmyre's continued commitment on a full-time basis through at least April 30, 2028, and will permit continued focus on organic growth and consideration of new opportunities for balance sheet growth, and permit consideration of possible strategic shifts designed to maximize enterprise value. The one-year renewal periods are intended to allow for a smooth management transition to occur at the appropriate time based on future circumstances.

In addition, the board of directors, at the recommendation of the Compensation Committee, has taken several steps designed to keep the existing senior management team in place during Mr. Grafmyre's remaining tenure and throughout the succession process. Those steps include increased use of stock options as a component of compensation to focus on longer term performance, and the use of supplemental executive retirement plan agreements for certain executives that provide a longer term benefit. Discussions have been held with each of the senior management team members regarding the future direction of

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the Corporation and how their roles will evolve as the Corporation pursues a growth strategy and throughout the succession process.

Promoting Stock Ownership

The board of directors believes that directors and senior management should have a meaningful ownership interest in the Corporation. Although the Corporation does not presently use minimum ownership guidelines, it has taken actions since the beginning of 2020 to encourage an increased level of ownership by directors and senior officers. During 2020, the Corporation implemented the 2020 Non-Employee Director Compensation Plan, which was approved by shareholders at the 2020 Annual Meeting of Shareholders. Under this Plan, non-employee directors who have not attained specified levels of stock ownership are required to receive a portion of their annual compensation in the form of common stock (currently 50% of total annual compensation), with the ability to elect to receive up to 100% of annual compensation in the form of common stock by making a written election prior to the calendar year to which the compensation relates. As of March 1, 2024 the Corporation has issued a total of 48,036 shares of common stock to non-employee directors under the Plan in lieu of otherwise payable cash compensation. In addition, Mr. Grafmyre's 2021 employment agreement provides that the Compensation Committee of the board of directors can require that up to 50% of the amount of any annual bonus payable to Mr. Grafmyre be paid in the form of common stock in lieu of cash. The percentage of the amount of annual bonus paid in the form of common stock can be increased above 50% with Mr. Grafmyre's consent. Any shares of common stock issued in payment of any portion of an annual bonus are subject to restrictions on transfer for up to three years following grant. During the past twelve months, as reported in filings with the Securities and Exchange Commission, current directors and executive officers have increased their net holdings in shares of the Corporation's common stock by approximately 25,000 shares in the aggregate.

Employee Safety

The Corporation and its banking subsidiaries have undertaken various actions designed to maintain a safe work environment for employees, particularly during the COVID-19 pandemic, including supplying employees with hand sanitizer, face masks, disinfecting supplies, and gloves. The Corporation has also allowed approximately one-third of the workforce to work remotely in accordance with the Corporation's pre-existing business continuity plans, while also maintaining data security and internal controls. Permitting employees to work remotely has allowed for increased social distancing capabilities within offices and branches.

Diversity

The Corporation is committed to supporting a culture of diversity and inclusion among its workforce and community. A member of senior management, who is a minority member, acts as the Corporation's Diversity Officer. The Corporation has also implemented various training sessions to promote a workforce and work environment that recognizes the value of a diverse employee base.

As the Corporation strives to build a more diverse workforce, it is also focused on increasing diversity on its board of directors and the boards of board of directors of its various subsidiaries. The vetting process for board members includes diversity as a factor for consideration.

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