NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 4, 1999
TO OUR SHAREHOLDERS:
NOTICE IS HEREBY GIVEN that pursuant to its By-Laws and call of its Directors,
the regular meeting of shareholders of the PENSECO FINANCIAL SERVICES
CORPORATION will be held at the Central City Office of Penn Security Bank and
Trust Company located at 150 North Washington Avenue, Scranton, Pennsylvania, on
Tuesday, May 4, 1999, at 2:00 P.M. for the purpose of considering and acting
upon the following matters:
1. Electing two (2) Directors of the Class of 2003 to serve for four (4)
years and until their successors are elected.
2. Whatever other business may be brought before the meeting or any
adjournment thereof.
Only those shareholders of record at the close of business on March 5, 1999
shall be entitled to vote at the meeting. If you do not expect to be personally
present, please sign the enclosed proxy, be sure to date the same, and return at
your earliest convenience in the enclosed, stamped envelope.
BY ORDER OF THE BOARD OF DIRECTORS
P. FRANK KOZIK
Secretary
March 26, 1999
1
<PAGE>
PENSECO FINANCIAL SERVICES CORPORATION
150 North Washington Avenue, Scranton, Pennsylvania 18503
PROXY STATEMENT MAILED MARCH 26, 1999 FOR THE ANNUAL MEETING TO BE HELD TUESDAY,
MAY 4, 1999, AT 2:00 P.M. AT THE CENTRAL CITY OFFICE OF PENN SECURITY BANK AND
TRUST COMPANY LOCATED AT 150 NORTH WASHINGTON AVENUE, SCRANTON, PENNSYLVANIA.
INTRODUCTION
Penn Security Bank and Trust Company (hereinafter, the "Bank") is a wholly-owned
subsidiary of Penseco Financial Services Corporation (hereinafter, the
"Company"). This Proxy Statement, while prepared in connection with the Annual
Meeting of Shareholders of the Company, contains certain information relating to
the Bank which will be identified where appropriate.
REVOCABILITY OF PROXY
Any person giving the proxy herein solicited may revoke it at any time prior to
its being voted at the annual meeting by submitting a later dated proxy, or by
contacting the Secretary, P. Frank Kozik, in writing prior to the meeting
indicating the shareholder's intention to revoke the proxy. Execution of the
accompanying proxy will not affect a shareholder's right to attend the meeting
and vote in person.
PERSON MAKING THE SOLICITATION
The solicitation is made by order of the Board of Directors of the Company, the
cost of which will be borne by the Company. Solicitation is being made primarily
by use of the mail, but the management may solicit proxies by telephone or
personal interview.
VOTING SECURITIES & PRINCIPAL HOLDERS THEREOF
The number of shares of common stock outstanding and entitled to vote at the
annual shareholders' meeting is 2,148,000 as of this date. Only those
shareholders of record at the close of business on March 5, 1999 shall be
entitled to vote. The presence, in person or by proxy, of the holders of a
majority of the total number of outstanding shares and entitled to vote is
necessary to constitute a quorum at the annual shareholders' meeting.
In the election of Directors, each shareholder has cumulative voting rights and
is entitled to cast in the aggregate as many votes as the number of shares
owned, multiplied by the number of Directors to be elected and to cast such
votes for one candidate or to distribute such votes among two or more
candidates. The candidates receiving the highest number of votes up to the
number of Directors to be chosen shall be elected. The proxy permits a
shareholder to vote for or withhold his vote from the election of Directors. The
proxyholders named on the Proxy will vote for the Board's nominees unless the
shareholder has withheld his vote from some or all of the nominees. Such
proxyholders may exercise discretionary authority to cumulate votes in the
election of Directors by distributing the votes they are authorized to cast
among the Board's nominees in order to elect the largest possible number of them
(in the event there is a nominee or nominees other than the Board's nominees),
and, to the extent possible, in order to cast the same number of votes for each
Board nominee. On other matters, each share of stock entitles the owner thereof
to one vote. Abstentions and broker non-votes are not included as votes cast.
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors, certain of its executive officers and persons who own more than ten
percent of a registered class of the Company's common stock (currently there are
no such persons), to file reports of ownership and changes in ownership with
respect to shares of the Company's common stock beneficially owned by them with
the Securities and Exchange Commission and to furnish the Company with copies of
all forms that they file. Based solely on its review of the copies of such forms
received by it, or written representations from certain reporting persons that
no such forms were required for those persons, the Company believes that during
fiscal 1998 all required reports were filed on a timely basis.
The following table sets forth, as of March 1, 1999, the amount and percentage
of the common stock of the Company beneficially owned by each Director and all
Principal Officers and Directors of the Company as a group. No shareholder owns
5% or more of the Company's stock.
2
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Amount and
Nature of Percent
Name of Individual Beneficial of
or Identity of Group Ownership(1) Class
- -------------------- ------------ -------
Edwin J. Butler....................................... 23,628(2) 1.100%
Richard E. Grimm...................................... 3,376(3) .157%
Russell C. Hazelton................................... 14,076(4) .655%
D. William Hume....................................... 3,531(5) .164%
James G. Keisling..................................... 18,452(6) .859%
P. Frank Kozik........................................ 16,016(7) .746%
Robert W. Naismith.................................... 19,452(8) .906%
James B. Nicholas..................................... 5,168(9) .241%
Emily S. Perry........................................ 2,100(10) .098%
Sandra C. Phillips.................................... 72,000(11) 3.352%
Otto P. Robinson, Jr.................................. 78,632(12) 3.661%
All Directors and Principal Officers
as a group (24 in group) ........................ 280,409 13.054%
(1) The securities "beneficially owned" by an individual are determined in
accordance with the definition of "beneficial ownership" set forth in the
regulations of the Securities and Exchange Commission and may include
securities owned by or for the individual's spouse and minor children and
any other relative who has the same home, as well as securities as to which
the individual has, or shares, voting or investment power or has the right
to acquire beneficial ownership within 60 days after March 1, 1999.
Beneficial ownership may be disclaimed as to certain of the securities.
(2) This total includes 18,172 shares owned jointly by Mr. Butler and his wife,
3,024 shares owned jointly with his children, and 2,132 shares in a
self-directed IRA in Penn Security Bank's Trust Department.
(3) This total includes 680 shares owned jointly by Mr. Grimm and his wife and
includes 2,692 shares held by Penn Security Bank under its Employee Stock
Ownership Plan in which Mr. Grimm has a vested interest.
(4) This total includes 8,724 shares owned jointly by Mr. Hazelton and his wife
and 960 shares in a self-directed IRA in Penn Security Bank's Trust
Department.
(5) This total includes 420 shares owned jointly by Mr. Hume and his wife and
includes 3,071 shares held by Penn Security Bank under its Employee Stock
Ownership Plan in which Mr. Hume has a vested interest.
(6) This total includes 1,400 shares owned jointly by Mr. Keisling and his
wife, 2,100 shares owned by Mr. Keisling's wife, 4,744 shares in a
self-directed IRA and 9,608 shares in a custodial account, both in Penn
Security Bank's Trust Department.
(7) This total includes 15,596 shares owned jointly by Mr. Kozik and his wife
and 300 shares owned by Scranton Craftsmen Profit Sharing Plan, for which
Mr. Kozik is Trustee.
(8) This total includes 13,500 shares owned jointly by Dr. Naismith and his
wife and 5,952 shares in a self-directed IRA in Penn Security Bank's Trust
Department.
(9) This total includes 658 shares owned by Mr. Nicholas' wife and daughter,
700 shares in a self-directed IRA in Penn Security Bank's Trust Department
and 1,600 shares owned by D. G. Nicholas Profit Sharing Plan, for which Mr.
Nicholas is Trustee.
(10) This total includes 1,680 shares owned jointly by Mrs. Perry, her husband
and her children.
3
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(11) These shares are held by Penn Security Bank's Trust Department.
(12) This total includes 9,456 shares owned jointly by Mr. Robinson and his
wife, 23,992 shares owned by Mr. Robinson's wife and children, and includes
5,504 shares held by Penn Security Bank under its Employee Stock Ownership
Plan in which Mr. Robinson has a vested interest.
ELECTION OF DIRECTORS
Introduction
Pursuant to Article III of the Company's By-Laws, the Board of Directors shall
consist of not fewer than five (5) or more than fifteen (15) members, with four
(4) classes of Directors, each class being as nearly equal in number as
possible.
Two (2) Directors of the Class of 2003 are to be elected at the Annual Meeting.
Each Director of the Class of 2003 will serve for a term of four (4) years and
until his successor is elected. Unless otherwise instructed, proxy holders will
vote the proxies received by them for the election of the two (2) nominees named
below. Other nominations may be submitted in accordance with Article II of the
Company's By-Laws, which provides that any person intending to nominate at the
annual meeting a candidate or candidates for the Board of Directors other than
those nominated by management must notify the Company by certified mail, return
receipt requested, which notice the Company must be in receipt of at least
forty-five (45) days before said meeting, of his intent to do so giving the
name(s) and address(es) of the person(s) he intends to nominate. Any
solicitation by or on behalf of such candidate is subject to Federal Securities
Laws and must comply therewith. The judge or judges of election shall not count
any votes solicited by or on behalf of any such candidate in violation of the
Federal Securities Laws or for any such candidate nominated without prior notice
thereof having been received by the Company as required above.
Nominees
The names of the nominees for Directors of the Class of 2003, and the Directors
in the Classes of 2000, 2001 and 2002 who will continue in office after the
Annual Meeting and until the expiration of their respective terms, together with
certain information regarding them, are as follows:
<TABLE>
NOMINEES FOR DIRECTOR
<CAPTION>
Term
Principal Occupation Director Will
Name Age for Past Five Years Since Expire*
- --------------------- --- ------------------------------------------------------- -------- -------
<S> <C> <C> <C> <C>
Class of 2003
- -------------
Edwin J. Butler 72 Mr. Butler retired in September, 1991 and was 1977 2003
Executive Vice-President and Cashier of the Bank.
P. Frank Kozik 59 Secretary (non-active officer). Mr. Kozik is President
of Scranton Craftsmen, Inc., Throop, PA, a corporation 1981 2003
dealing in ornamental and miscellaneous iron and
pre-cast concrete products.
</TABLE>
*If elected at the Annual Meeting
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It is the intent of the persons named in the proxy to vote for the nominees
listed in the above schedule. Management is not aware of any nominees
unavailable for election. In the event, however, that vacancies occur, such
shares may be voted for substitute nominees, if any, designated by management.
<TABLE>
DIRECTORS TO CONTINUE IN OFFICE
<CAPTION>
Term
Principal Occupation Director Will
Name Age for Past Five Years Since Expire
- --------------------- --- ------------------------------------------------------- -------- ------
<S> <C> <C> <C> <C>
Class of 2000
- -------------
Russell C. Hazelton 64 Mr. Hazelton is a Captain for Trans World Airlines. 1977 2000
Robert W. Naismith, 54 Dr. Naismith is Chairman and Chief Executive Officer 1988 2000
Ph.D. of Genome Securities, Inc., an investment banking
firm focused on healthcare and the life sciences
industry. Dr. Naismith formerly was Managing
Director of Healthcare at BlueStone Capital Partners
& Chief Executive Officer of Biofor, Inc., a research
and discovery pharmaceutical company.
Emily S. Perry 58 Mrs. Perry is an Account Executive at Murray 1983 2000
Insurance Company, Scranton, PA.
Class of 2001
- -------------
Richard E. Grimm 50 Executive Vice-President and Treasurer. Mr. Grimm 1994 2001
has served the Bank as Executive Vice-President
and Cashier since 1994.
James B. Nicholas 47 Mr. Nicholas is President of D.G. Nicholas Co., 1981 2001
Scranton, PA, a wholesale Auto Parts Company.
Sandra C. Phillips 56 Mrs. Phillips has served on the Bank's Abington 1994 2001
Advisory Board since 1984. She is active in
various community associations and organizations.
Class of 2002
- -------------
D. William Hume 72 Mr. Hume retired in January, 1999 and was Senior 1991 2002
Vice-President and Assistant Secretary of the Bank.
James G. Keisling 50 Mr. Keisling is a partner in Compression Polymers 1984 2002
Group, manufacturers of plastic sheet products.
Otto P. Robinson, Jr. 60 President, CEO and General Counsel. Mr. Robinson
is a practicing attorney. Mr. Robinson has since his 1967 2002
election as President in 1975, been devoting most
of his time to banking matters.
</TABLE>
5
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BOARD AND COMMITTEE MEETINGS; DIRECTORS' COMPENSATION
The Company has a standing Audit Committee of the Board consisting of Directors
Edwin J. Butler, Russell C. Hazelton, James G. Keisling and P. Frank Kozik, none
of whom are operating officers of the Company. Meetings of the committee are
held approximately once each quarter to discuss the quarterly reports of the
Company's Internal Auditor and management's response thereto and report to the
Board thereon. In addition, at one of the meetings, the Audit Committee meets
with the Company's independent external audit firm to discuss the results of the
annual CPA audit. Last year there were four meetings of the Audit Committee.
The Company has a standing Compensation Committee of the Board consisting of
Directors Edwin J. Butler, P. Frank Kozik, Robert W. Naismith, Emily S. Perry
and Otto P. Robinson, Jr. The committee recommends to the Board of Directors the
compensation to be paid to the Executive Officers of the Company as well as
general guidelines for compensation of the employees of the Bank. Four meetings
of the committee were held in 1998.
The Company does not have a standing Nominating Committee of the Board.
The Board of Directors met 27 times in 1998. All Directors attended at least 75%
of the total of the Board of Directors meetings and the committee meetings of
which they were members.
During 1998, Directors received an annual retainer of $6,000.00 plus $500.00 for
each Board meeting attended and $200.00 for each committee meeting attended.
Directors who are operating officers of the Company do not receive fees for
committee meetings attended.
EXECUTIVE COMPENSATION
The following table sets forth, for fiscal years 1996 through 1998, the total
compensation paid by the Company for services in all capacities to the Company's
Chief Executive Officer and to each of the Company's most highly compensated
executive officers who received compensation in excess of $100,000.00 for the
fiscal year ended December 31, 1998:
<TABLE>
ANNUAL COMPENSATION (1)
-----------------------
<CAPTION>
Name and All Other
Principal Position Year Salary ($) Bonus($) Compensation($)
- ------------------ ---- ---------- -------- ---------------
<S> <C> <C>
Otto P. Robinson, Jr. 1998 197,827.00 -- 20,221.85 (2)
President, CEO & 1997 193,948.00 15,516.00 28,939.17 (3)
General Counsel 1996 190,144.00 15,211.60 27,609.46 (4)
Richard E. Grimm 1998 108,480.00 8,678.00 457.66 (5)
Executive Vice President 1997 105,321.00 10,532.00 3,271.85 (6)
& Treasurer 1996 102,752.00 10,275.00 3,250.26 (6)
</TABLE>
(1) Other annual compensation received by Mr. Robinson consisted of the use of a
Bank owned automobile. For each fiscal year disclosed, the aggregate amount of
this perquisite received by Mr. Robinson was less than 10% of his salary and
bonus and is, therefore, not reportable.
(2) "All Other Compensation" consists of a cash contribution to the Retirement
Profit Sharing Plan of $616.85 and $19,605.00 for Supplemental Benefit Plan
described on page 8.
(3) "All Other Compensation" consists of a cash contribution to the Employee
Stock Ownership Plan of $4,236.17 which may be used to purchase shares of the
Company's stock and $24,703.00 for Supplemental Benefit Plan described on page
8.
(4) "All Other Compensation" consists of a cash contribution to the Employee
Stock Ownership Plan of $4,315.46 which may be used to purchase shares of the
Company's stock and $23,294.00 for Supplemental Benefit Plan described on page
8.
(5) "All Other Compensation" consists of a cash contribution to the Retirement
Profit Sharing Plan.
(6) "All Other Compensation" consists of a cash contribution to the Employee
Stock Ownership Plan which may be used to purchase shares of the Company's
stock.
6
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COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Company's compensation program for executive officers is administered by the
Compensation Committee of the Board of Directors ("Committee"). The Committee
makes recommendations to the Board of Directors regarding the compensation
arrangements for executive officers, including the Chief Executive Officer. The
compensation program for the Company's executive officers consists of a base
salary, annual cash bonus, and other perquisites. In 1998, Otto P. Robinson,
Jr., the President and Chief Executive Officer, was the only executive officer
to receive a perquisite, which was the use of a Bank owned automobile.
The Committee determines executive base salaries by level of responsibility,
individual performances and, to a lesser degree, Company performance, as well as
by the need to provide a competitive package that allows the Company to retain
key executives. After reviewing individual performances for the year and
available information on salaries at other financial institutions of similar
size, the Chief Executive Officer makes recommendations to the Committee
concerning the base salaries of other executive officers. Using the same review
process, the Committee makes recommendations to the Board regarding the Chief
Executive Officer.
Annual cash bonuses are intended to focus the efforts of executive officers on
the attainment of specific annual performance goals which will promote the
overall success of the Company. The Chief Executive Officer evaluates other
executive officers in their achievement of specific goals and makes
recommendations to the Committee regarding bonuses to be awarded. The Committee
recommends to the Board the annual bonus for the Chief Executive Officer based
to a large degree upon the financial performance of the Company using such
financial measures as earnings per share, return on average assets and return on
average equity. As a result of the decline in the Company's performance
measures, Mr. Robinson did not receive a cash bonus for 1998. The President and
Chief Executive Officer did not participate in the decision by the Board of
Directors relating to his base salary and annual cash bonus.
MEMBERS OF THE COMMITTEE
Robert W. Naismith, Ph.D., Chairman
Edwin J. Butler
P. Frank Kozik
Emily S. Perry
Otto P. Robinson, Jr.
7
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COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 1998, the Company employed Otto P. Robinson, Jr. as its President and
Chief Executive Officer. Mr. Edwin J. Butler is a retired officer of the Bank.
Mr. Robinson abstained from all voting regarding his own compensation.
EMPLOYEE BENEFIT PLANS
Principal officers of the Bank participate in the Bank's employee benefit
programs on the same basis as all other employees and only receive the same
benefits as all other employees.
Penn Security Bank and Trust Company maintains a qualified defined benefit
retirement (Pension) plan for its employees and officers. Directors who are
non-active officers are not included in the plan. In 1998, the Bank contributed
$6,000.00 to the plan. Under the funding method employed for this plan, the
amount of contribution, payment or accrual in respect of a specified person is
not and cannot readily be separately or individually calculated for the plan.
Remuneration for pension benefit purposes includes all earnings reportable as
IRS Form W-2 wages for Federal income tax withholding purposes. Final Average
Compensation means the average compensation paid to an employee during the five
consecutive calendar years out of the final ten years of service which produces
the highest average.
Estimated Annual Retirement Benefit at Age 65.
Years of Service
---------------------------------------------------------
Average Annual
Earnings 10 yrs. 20 yrs. 30 yrs. 40 yrs.
- -------------- ---------- ---------- ---------- ----------
$ 25,000.00 $ 2,500.00 $ 5,000.00 $ 7,500.00 $10,000.00
50,000.00 5,943.60 11,887.20 17,830.80 23,774.40
75,000.00 9,693.60 19,387.20 29,080.80 38,774.40
100,000.00 13,443.60 26,887.20 40,330.80 53,774.40
125,000.00 17,193.60 34,387.20 51,580.80 68,774.40
150,000.00 20,943.60 41,887.20 62,830.80 83,774.40
160,000.00 & over 22,443.60 44,887.20 67,330.80 89,774.40
The above table of estimated annual retirement benefits is representative of an
employee currently age 65 whose salary remained unchanged during his last five
years of employment and whose benefit will be paid for the remainder of his
life. The benefits payable under the plan are subject to the maximum benefit
limitations of Section 401 (a)(17) of the Internal Revenue Code. Benefits based
on normal retirement at age 65 provided for an annual pension equal to 1% of his
Final Average Compensation up to his Covered Compensation, plus 1 1/2% of his
Final Average Compensation in excess of his Covered Compensation per year of
Credited Service, not beyond his normal retirement date, with partial credit for
fractional years. Covered Compensation is determined in accordance with the
Social Security Act as in effect at the time of the employee's final termination
of employment. Covered Compensation is the average annual wage covered under the
Social Security Act throughout the employee's working lifetime. In accordance
with the Social Security Act, maximum Covered Compensation for the year 1998 was
$31,128.00.
The years of creditable service as of December 31, 1998 for Messrs. Robinson and
Grimm were 23 and 19, respectively.
Supplemental Benefit Plan Agreement. Penn Security Bank and Trust Company has
entered into a Supplemental Benefit Plan Agreement (the "Plan") dated December
28, 1995 with a retroactive effective date of January 1, 1994, with Mr.
Robinson. The purpose of the Supplemental Benefit is to grant additional
benefits in excess of those accrued in the pension plan due to the limit on
compensation contained in Section 401 (a)(17) of the Code. The Plan is intended
to be an unfunded excess benefit plan under Section (3)(36) of the Employee
Retirement Income Security
8
<PAGE>
Act of 1974 (ERISA). The Plan provides that if Mr. Robinson retires from
employment with Penn Security Bank and Trust Company at his Normal Retirement
Date, he shall be entitled to receive a benefit equal to (a) the benefit which
would have accrued under the provision of the Pension Plan, if such Pension Plan
were administered without regard to the limitations under Code Section 401
(a)(17), less, (b) the amount of the Normal Retirement Benefit which he is
entitled to receive under the Pension Plan. If he retired from employment at his
Early Retirement Date, he shall be entitled to receive a benefit equal to (a)
the benefit which would have accrued under the provisions of the Pension Plan
computed in accordance with Section 3.1 to his Early Retirement Date, less (b)
the amount of his Early Retirement Benefit which he would be entitled to receive
under the Plan. If Early Retirement Benefits commence prior to his Normal
Retirement Date, the benefits payable under the Plan and the Pension Plan shall
be actuarially reduced for such early commencement to the extent provided under
the terms of the Pension Plan. If retirement is after his Normal Retirement
Date, he shall be entitled to receive a benefit equal to (a) the benefit which
would have accrued under the provisions of the Pension Plan, computed in
accordance with Section 3.1 to his Deferred Retirement Date, less, (b) the
amount of Deferred Retirement Benefit which he is entitled to receive under the
Pension Plan. In no event will Mr. Robinson be entitled to receive total
benefits from the Plan and the Pension Plan in excess of the benefit he would
have received from the Pension Plan if the limitations under Code Section 401
(a)(17) were not applicable to the Pension Plan. If Mr. Robinson terminates
employment with Penn Security Bank and Trust Company for any reason, the Accrued
Benefit at the date of termination shall be valued and payable in an aggregate
amount equal to his accrued benefit. Any such payments will be paid from the
Bank's general assets. If a Change of Control of Penn Security Bank and Trust
Company occurs, Mr. Robinson's accrued benefit shall be valued and payable in
accordance with the provisions stated above. "Change of Control" shall occur
when any person other than the Bank obtains ownership or voting power with
respect to greater than 50 percent of the aggregate value or voting power, as
applicable, of the Employer's capital stock.
The Bank's Retirement Profit Sharing Plan includes employees as well as
officers. Directors who are non-active officers are not included in the plan.
Under the plan, amounts voted by the Board of Directors are paid into a fund and
each employee is credited with a share in proportion to his annual compensation.
Upon retirement or death or termination or disability, each employee is paid the
total amount of his credits in the fund in one of a number of optional ways. In
1998, the Bank contributed $20,000.00 to the Retirement Profit Sharing Plan.
The Bank's Employee Stock Ownership Plan (ESOP), includes employees as well as
officers. Directors who are non-active officers are not included in the plan.
Under the plan, amounts voted by the Board of Directors are paid into the ESOP
and each employee is credited with a share in proportion to his annual
compensation. All contributions to the ESOP are invested in or will be invested
primarily in Penseco Financial Services Corporation Stock. In 1998, the Bank did
not contribute to ESOP. Distribution of a participant's stock account occurs
upon retirement or death or disability or termination of employment.
TRANSACTIONS WITH DIRECTORS AND PRINCIPAL OFFICERS
The Bank has had, and may be expected to have in the future, banking
transactions in the ordinary course of business with Directors, principal
officers, their immediate families, and affiliated companies in which they are
principal stockholders (commonly referred to as related parties), on the same
terms, including interest rates and collateral, as those prevailing at the time
for comparable transactions with others and did not involve more than the normal
risks of collectability or present other unfavorable features. These persons and
firms were indebted to the Bank for loans totaling $3,962,663.87 and
$4,763,365.99 at February 1, 1999 and 1998, respectively. Such loans had a
maximum unpaid balance in the aggregate of $5,295,932.80 and $5,318,366.86
during the years ended December 31, 1998 and 1997, respectively.
In this Proxy Statement, the term "officer" means the President, Executive
Vice-President, Senior Vice-Presidents, Vice-Presidents, Treasurer, Secretary,
Controller and Manager, Data Processing.
9
<PAGE>
SHAREHOLDER RETURN PERFORMANCE GRAPH
The following line graph sets forth comparative information regarding the
Company's cumulative shareholder return on its common stock over the last five
fiscal years. Total shareholder return is measured by dividing total dividends
(assuming dividend reinvestment) plus share price change for a period by the
share price at the beginning of the investment period. The Company's cumulative
shareholder return based on an investment of $100 at the beginning of the
five-year period beginning December 31, 1993 is compared to the cumulative total
return of the S & P 500 Index ("S & P 500") and the S & P Major Regional Bank
Index ("S & P Banks"). The yearly points marked on the horizontal axis of the
graph correspond to December 31st of that year.
1993 1994 1995 1996 1997 1998
PSB&T .............. 100.00 128.13 129.17 131.25 165.56 241.94
S&P 500 ............ 100.00 101.32 135.08 162.02 211.39 267.06
S&P BANKS .......... 100.00 91.14 138.20 183.01 268.73 290.45
10
<PAGE>
AUDITORS
The Board of Directors has selected McGrail, Merkel, Quinn and Associates,
Certified Public Accountants, to conduct an independent audit of the financial
statements of the Company for the year 1998, and it is expected they will be
selected for the year 1999. Representatives of the firm are expected to be
present at the meeting and will have an opportunity to make a statement if they
so desire and will be available to respond to appropriate questions. Mr. Robert
P. Heim was re-elected by the Board of Directors this year to the position of
Director of Internal Audit. Mr. Heim will be present at the annual meeting to
respond to any appropriate questions.
SHAREHOLDER PROPOSALS FOR 2000 ANNUAL MEETING
Any shareholder proposal submitted for inclusion in the Company's proxy
statement and form of proxy for the 2000 Annual Meeting of shareholders must be
received at the Company's Executive Offices, 150 North Washington Avenue,
Scranton, Pennsylvania 18503 on or before December 17, 1999.
OTHER MATTERS
The Board of Directors at present knows of no other business to be presented by
or on behalf of the Company or its management at the meeting. If any other
business is presented at said meeting, the proxy herein solicited will be voted
in accordance with the recommendations of the Board of Directors.
By order of the Board of Directors, March 26, 1999.
PENSECO FINANCIAL SERVICES CORPORATION
Scranton, Pennsylvania 18503
OTTO P. ROBINSON, JR.
President
11
<PAGE>
MARCH 26, 1999
NOTICE
THE COMPANY WILL, WITHOUT CHARGE, ON WRITTEN REQUEST OF ANY PERSON WHOSE PROXY
HAS BEEN SOLICITED FOR THE 1999 ANNUAL MEETING, MAIL TO SAID PERSON A COPY OF
THE COMPANY'S ANNUAL REPORT ON FORM 10-K INCLUDING THE FINANCIAL STATEMENTS AND
THE SCHEDULES THERETO REQUIRED TO BE FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION FOR THE COMPANY'S MOST RECENT FISCAL YEAR. WRITTEN REQUESTS SHOULD BE
SUBMITTED TO:
PATRICK SCANLON, CONTROLLER
PENSECO FINANCIAL SERVICES CORPORATION
150 NORTH WASHINGTON AVENUE
SCRANTON, PENNSYLVANIA 18503
THE COMPANY'S ANNUAL REPORT TO SHAREHOLDERS, INCLUDING FORM 10-K, ACCOMPANIES
THIS STATEMENT AND COPIES ARE AVAILABLE TO THE PUBLIC. THE ANNUAL REPORT SERVES
AS THE COMPANY'S ANNUAL DISCLOSURE STATEMENT AS REQUIRED UNDER THE SECURITIES
EXCHANGE ACT OF 1934, AND MAY BE OBTAINED AT ANY BRANCH LOCATION OF THE BANK, OR
BY CONTACTING PATRICK SCANLON, CONTROLLER, PENSECO FINANCIAL SERVICES
CORPORATION, 150 NORTH WASHINGTON AVENUE, SCRANTON, PENNSYLVANIA 18503. PHONE
(570)346-7741 OR (800)327-0394.
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PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
KNOW ALL MEN BY THESE PRESENTS, that I, the undersigned shareholder in the
PENSECO FINANCIAL SERVICES CORPORATION (the "Company"), do hereby nominate,
constitute and appoint RUTH W. LEVERICH, AVERANDA MECCA AND CAROL GEMMELL and
each of them (with full power to act without the others) my true and lawful
attorney(s) with full power of substitution, for me and in my name, place and
stead to vote all of the stock of the said PENSECO FINANCIAL SERVICES
CORPORATION, standing in my name on the books of the said Company on March 5,
1999, at the annual meeting of the shareholders thereof to be held at the
Central City Office of Penn Security Bank and Trust Company located at 150 North
Washington Avenue, Scranton, Pennsylvania on Tuesday, May 4, 1999, at 2:00 P.M.
or at any adjournment or adjournments thereof, hereby revoking all proxies by me
heretofore made, with all the powers the undersigned would possess if personally
present at said meeting as follows:
1. ELECTION OF DIRECTORS: For the election of two (2) Directors of the Class
of 2003 listed in the proxy statement dated March 26, 1999 accompanying the
notice of the said meeting as Directors of the Company to serve for four
(4) years and until their successors are elected.
FOR ALL NOMINEE(S) listed WITHHOLD AUTHORITY
below (except as _marked to the to vote for all_nominees
contrary below).|_| listed below. |_|
(INSTRUCTIONS: To withhold authority to vote for any individual nominee(s) mark
the box next to the nominee's name below.)
Class of 2003
- -------------
_ _
|_| Edwin J. Butler |_| P. Frank Kozik
2. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting, or any adjournment
thereof.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY
THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED
FOR PROPOSAL 1 AND IN ACCORDANCE WITH INSTRUCTIONS OF MANAGEMENT ON OTHER
BUSINESS PROPERLY COMING BEFORE THE MEETING.
IN WITNESS WHEREOF, I have hereunto set my hand this _________________day of
________________________, 1999.
_______________________________________SIGNATURE
_______________________________________SIGNATURE
(Execute proxy and return in stamped envelope for this purpose)
