SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of
1934 (Amendment No. [ ])
[xx] Filed by Registrant
[ ] Filed by a Party other than the Registrant
Check the appropriate box:
[xx] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Sec. 240.14a-11(c) or Sec. 240.14a-12
Citizens Financial Services, Inc.
(Name of Registrant as Specified in Its Charter)
__________________________________
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[xx] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(l) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price of other underlying value of transactions computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount of which
the filing is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
<PAGE>
CITIZENS FINANCIAL SERVICES, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 21, 1998
TO THE SHAREHOLDERS OF CITIZENS FINANCIAL SERVICES, INC.:
Notice is hereby given that the Annual Meeting of Shareholders of CITIZENS
FINANCIAL SERVICES, INC. (the "Corporation") will be held at 12:00 p.m.,
prevailing time, on Tuesday, April 21, 1998 at the Tioga County Fairgrounds
Youth Building, Whitneyville, Pennsylvania, 16901, for the following purposes:
1. To elect three (3) Class 2 Directors to serve for a three-year term
and until their successors are elected and qualified.
2. To consider and act upon a proposal to amend Article 4 of the Articles
of Incorporation of the Corporation, as amended, to increase the
number of authorized shares of the Corporation's Common Stock, par
value $1.00 per share, from 5,000,000 shares to 10,000,000 shares.
3. To consider and act upon a proposal to amend and restate Article 13 of
the Articles of Incorporation of the Corporation, as amended, to
provide that preemptive rights shall not exist with respect to the
Corporation's securities.
4. To transact such other business as may properly come before the Annual
Meeting or any adjournment or postponement thereof.
In accordance with the Bylaws of the Corporation and action of the Board of
Directors, only those shareholders of record at the close of business on March
11, 1998 will be entitled to notice of and to vote at the Annual Meeting and
any adjournment or postponement thereof.
A copy of the Corporation's Annual Report for the fiscal year ended December
31, 1997 is enclosed with this Notice. Copies of the Corporation's Annual
Report for the 1996 fiscal year may be obtained at no cost by contacting
Richard E. Wilber, President, 15 South Main Street, Mansfield, Pennsylvania
16933, telephone: 800-326-9486.
You are urged to mark, sign, date and promptly return your Proxy in the
enclosed 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 signed Proxy, regardless of the number of shares you hold, will
aid the Corporation in reducing the expense of additional proxy solicitation.
The giving of such Proxy does not affect your right to vote in person if you
attend the meeting and give written notice to the Secretary of the
Corporation.
By Order of the Board of Directors,
/s/ Richard E. Wilber
Richard E. Wilber, President
March 18, 1998
<PAGE>
CITIZENS FINANCIAL SERVICES, INC.
PROXY STATEMENT FOR THE ANNUAL MEETING OF
SHAREHOLDERS TO BE HELD ON APRIL 21, 1998
GENERAL
Introduction, Date, Time and Place of Annual Meeting
This Proxy Statement is furnished in connection with the solicitation by the
Board of Directors of Citizens Financial Services, Inc. (the "Corporation"), a
Pennsylvania business corporation, of proxies to be voted at the Annual
Meeting of Shareholders of the Corporation to be held at 12:00 p.m.,
prevailing time, on Tuesday, April 21, 1998 at the Tioga County Fairgrounds
Youth Building, Whitneyville, Pennsylvania 16901.
The principal executive office of the Corporation is located at First Citizens
National Bank (the "Bank"), 15 South Main Street, Mansfield, Pennsylvania
16933. The telephone numbers for the Corporation are 717-662-2121 or
800-326-9486. All inquiries should be directed to Richard E. Wilber,
President and Chief Executive Officer of the Corporation.
Solicitation and Voting of Proxies
This Proxy Statement and the enclosed form of the proxy (the "Proxy") are
first being sent to shareholders of the Corporation on or about March 18,
1998.
Shares represented by proxies on the accompanying 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 election of the nominees for Class 2 Director named below to serve for
a three-year term and until their successors are elected and qualified, FOR
the proposal to approve and adopt an amendment to Article 4 of the Articles of
Incorporation of the Corporation, as amended, to increase the number of
authorized shares of common stock of the Corporation to 10,000,000, FOR the
proposal to approve and adopt an amended and restated Article 13 of the
Articles of Incorporation of the Corporation, as amended, to provide that
preemptive rights shall not exist with respect to the Corporation's
securities, and FOR the transaction of such other business as may properly
come before the Annual Meeting and any adjournment or postponement thereof.
Execution and return of the enclosed Proxy will not affect a shareholder's
right to attend the Annual Meeting and vote in person, after giving written
notice to the Secretary of the Corporation. The cost of preparing,
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 use of
the mail, certain directors, officers and employees of the Corporation and the
Bank may solicit proxies personally, by telephone, telegraph and by
telecopier. Arrangements will be made with brokerage houses and other
custodians, nominees and fiduciaries to forward proxy solicitation material to
the beneficial owners of stock held of record by these persons, and, upon
request therefore, the Corporation will reimburse them for their reasonable
forwarding expenses.
Revocability of Proxy
A shareholder who returns a Proxy may revoke the Proxy at any time before it
is voted only (1) by giving written notice of revocation to Terry B. Osborne,
Secretary of Citizens Financial Services, Inc., at 15 South Main Street,
Mansfield, Pennsylvania 16933, (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.
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<PAGE>
Voting Securities, Record Date and Quorum
At the close of business on March 11, 1998, the Corporation had outstanding
2,746,564 shares of common stock, par value $1.00 per share, the only
authorized class of stock (the "Common Stock").
Only holders of Common Stock of record at the close of business on March 11,
1998 will be entitled to notice of and to vote at the Annual Meeting.
Cumulative voting rights do not exist with respect to the election of
directors. On all matters to come before the Annual Meeting, each share of
Common Stock is entitled to one vote.
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.
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 the
transaction of business 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 matters as to which the broker withheld authority.
Assuming the presence of a quorum, the three nominees for director receiving
the highest number of votes cast by shareholders entitled to vote for the
election of directors shall be elected. Votes withheld from a nominee and
broker non-votes will not be cast for such nominee. Assuming the presence of
a quorum, the affirmative vote of a majority of all votes cast by shareholders
entitled to vote thereon is required to approve and adopt the Amendments to
the Corporation's Articles of Incorporation.
PRINCIPAL BENEFICIAL OWNERS OF THE CORPORATION'S STOCK
Principal Owners
The following table sets forth, as of March 11, 1998, the name and address of
each person who owns of record or who is known by the Board of Directors to be
the beneficial owner of more than five percent (5%) of the Corporation's
outstanding Common Stock, the number of shares beneficially owned by such
person and the percentage of the Corporation's outstanding Common Stock so
owned.
Percent of Outstanding
Number of Shares Common Stock
Name and Address Beneficiall Owned (1) Beneficially Owned
R. Lowell Coolidge 138,460 5.04%
Post Office Box 41
Wellsboro, Pennsylvania 16901
(1) The securities "Beneficially Owned" by an individual are 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 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 to which the individual has or shares voting or investment
power or has the right to acquire beneficial ownership within 60 days
after March 11, 1998. Beneficial ownership may be disclaimed as to
certain of the securities.
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<PAGE>
Beneficial Ownership by Officers, Directors and Nominees
The following table sets forth as of March 11, 1998, the amount and percentage
of the Common Stock beneficially owned by each director, each nominee and all
executive officers and directors of the Corporation and Bank as a group. This
information is furnished by the directors and the Corporation.
Name and Beneficial Amount and Nature of
Owner Beneficial Ownership (1) Percent of Class
CURRENT CLASS 2 DIRECTORS WHOSE TERM EXPIRES IN 1998 AND
NOMINEES FOR CLASS 2 DIRECTOR WHOSE TERM EXPIRES IN 2001
John E. Novak 3,270 (3) .12%
Rudolph J. van der Hiel 16,970 (4) .62%
CURRENT CLASS 2 DIRECTOR NOT UP FOR REELECTION
Robert E. Dalton (2) 31,588 (5) 1.15%
CURRENT CLASS 1 DIRECTORS WHOSE TERM EXPIRES IN 1999
Carol J. Tama 69,066 2.51%
R. Lowell Coolidge 138,460 (6) 5.04%
John M. Thomas, M.D. 45,452 (7) 1.65%
Larry J. Croft 22,674 (8) .83%
Richard E. Wilber 9,338 (9) .34%
CURRENT CLASS 3 DIRECTORS WHOSE TERM EXPIRES IN 2000
Bruce L. Adams 4,248 (10) .15%
William D. Van Etten 5,854 (11) .21%
All Nominees, Directors and 349,086 12.71%
Executive Officers as a Group - 14
persons
(1) The securities "beneficially owned" by an individual are 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 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 to which the individual has or shares voting or investment
power or has the right to acquire beneficial ownership within 60 days
after March 11, 1998. Beneficial ownership may be disclaimed as to
certain of the securities.
(2) Mr. Dalton is retiring as a Director from the Corporation and the Bank.
(3) Mr. Novak holds 3,184 shares individually, 86 shares are held by his
spouse.
(4) Mr. van der Hiel holds 15,506 shares individually, 22 shares are held
jointly with his spouse, 1,442 shares are held by his spouse.
(5) Mr. Dalton holds 2,454 shares individually, 29,134 shares are held by his
spouse.
(6) Mr. Coolidge holds 110,470 shares individually, 27,990 shares are held by
his spouse.
(7) Dr. Thomas holds 44,944 shares individually, 508 shares are held by his
spouse.
Page 3
<PAGE>
(8) Mr. Croft holds 12,958 shares individually, 9,192 shares jointly with his
spouse, 524 shares are held by his spouse.
(9) Mr. Wilber holds 6,480 shares individually, 694 shares are held jointly
with his spouse, 622 shares are held by his spouse, 1,542 shares are held
by his wife as custodian.
(10) Mr. Adams holds 3,956 shares individually, 292 shares jointly with his
spouse.
(11) Mr. Van Etten holds 4,982 shares individually, 872 shares are held jointly
with his spouse.
ELECTION OF DIRECTORS
The Articles of Incorporation provide that the Board of Directors shall
consist of not less than five (5) nor more than twenty-five (25) shareholders,
the exact number to be fixed and determined from time to time by resolution of
a majority of the full Board of Directors or by resolution of the shareholders
at any annual or special meeting. The number of Directors is currently set at
ten (10). The Articles 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 Class 2 Directors elected at this Annual Meeting
will serve for a three (3) year term. The Class 1 and 3 Directors at this
Annual Meeting will continue to serve for one and two years, respectively, in
order to complete their three year terms.
It is intended that the Proxies solicited hereunder will be voted FOR (unless
otherwise directed) the three (3) nominees named below. The Corporation does
not contemplate that any nominee will be unable to serve as Director for any
reason. Each nominee has agreed to serve if elected. However, in the event
one or more of the nominees should be unable to stand for election, the vote
will be cast for the remaining nominees in accordance with the best judgement
of the Board of Directors.
There is no cumulative voting for the election of directors. Each share of
Common Stock is entitled to cast only one vote for each nominee. For example,
if a shareholder owns ten shares of Common Stock, he or she may cast up to ten
votes for each of the Directors in the class to be elected.
INFORMATION AS TO NOMINEES AND DIRECTORS
The following table contains certain information with respect to the
Corporation's Directors and nominees for Class 2 Director. The date appearing
in parenthesis opposite each Director's name in the "Director Since" column
represents the year in which each individual became a Director of the Bank,
or any predecessor institution acquired by the Bank. Each nominee presently
serves as a Director of the Bank, as well as a Director of the Corporation
except for Mark L. Dalton, who is a nominee for Director of the Corporation
but currently serves as a Director of the Bank. All Directors have been
engaged in the principal occupation indicated for five years or more.
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<PAGE>
Principal Occupation
for Past Five Years
and Position Held with the Director Since
Name Age Corporation and the Bank Corporation/Bank
CURRENT CLASS 2 DIRECTORS WHOSE TERM EXPIRES IN 1998
Robert E. Dalton 65 Chairman of the Board - 1984
Citizens Financial Services, (1957)
Inc. and First Citizens
National Bank; Real Estate and
Insurance Broker
John E. Novak 61 Retired School Administrator 1984
with Southern Tioga School (1976)
District; since 1993 has
supervised Student Teachers
at Elmira College
Rudolph J. van der Hiel 58 Attorney-at-Law with the Law 1984
Offices of van der Hiel & (1975)
Chappell; Vicar at St. James
Episcopal Church, Mansfield and
Trinity Episcopal Church, Wellsboro
NOMINEES FOR CLASS 2 DIRECTOR WHOSE TERM EXPIRES IN 2001
John E. Novak 61 Retired School Administrator 1984
with Southern Tioga School (1976)
District; since 1993 has
supervised Student Teachers
at Elmira College
Rudolph J. van der Hiel 58 Attorney-at-Law with the Law 1984
Offices of van der Hiel & (1975)
Chappell; Vicar at St. James
Episcopal Church, Mansfield and
Trinity Episcopal Church, Wellsboro
Mark L. Dalton 43 Principal owner of Robert E.
Dalton General Insurance (1997)
CURRENT CLASS 1 DIRECTORS WHOSE TERM EXPIRES IN 1999
Carol J. Tama 57 President of Monaghan 1986
Transportation Company; Vice (1984)
President of Keystone Parts
Manufacturing, Inc.
R. Lowell Coolidge 57 Attorney-at-Law with the firm 1984
of Walrath and Coolidge (1984)
Richard E. Wilber 49 President of Citizens Financial 1984
Sevices, Inc. and First (1983)
Citizens National Bank
John M. Thomas, M.D. 64 Retired Executive Chairman of 1990
Guthrie Healthcare System; (1985)
President of Chemung Spring
Water Company
Larry J. Croft 62 General Manager of Croft Ford, 1990
Inc.; Secretary of Croft Lumber (1969)
Co. Inc.
Page 5
<PAGE>
CURRENT CLASS 3 DIRECTORS WHOSE TERM EXPIRES IN 2000
Bruce L. Adams 61 President of Bru-Cel 1991
Distributing Co., Inc. (1991)
William D. Van Etten 64 Dairy Farmer 1984
THE BOARD OF DIRECTORS AND ITS COMMITTEES
During 1997, there were six (6) regular meetings of the Board of Directors of
the Corporation and twenty three (23) regular meetings of the Board of
Directors of the Bank. Each of the Directors attended at least seventy-five
percent of the combined total number of meetings of the Corporation's and the
Bank's Board of Directors.
There is no family relationship, by blood, marriage, or adoption, between any
of the Directors and any other Director, Officer, or full-time Employee, of
the Corporation or of the Bank.
To the best knowledge of the management of the Corporation and the Bank, none
of the Directors are involved in any legal action in his/her individual
capacity that is material to an evaluation of his/her ability or integrity to
act as a Director.
The Corporation has no standing audit committee or nominating committee of the
Board of Directors. Matters within the jurisdiction of these committees are
considered by the Board of Directors of the Bank.
NOMINATIONS FOR DIRECTORS
Nominations for Directors, other than those made by or on behalf of the
existing Board of Directors, to be elected at an annual meeting of
shareholders must be submitted to the Secretary of the Corporation in writing
not less than ninety (90) days nor more than one-hundred twenty (120) days
prior to the date of the meeting. Such nominations must be in accordance with
Section 202 of the Corporation's Bylaws and contain the information specified
therein.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities and Exchange Act of 1934, as amended, requires
the Corporation's officers and directors, and persons who own more than 5% of
the registered class of the Corporation's equity securities, to file reports
of ownership and changes of ownership with the Securities and Exchange
Commission ("SEC"). Officers, directors and greater than 5% shareholders are
required by SEC regulation to furnish the Corporation with copies of all
Section 16(a) forms that they file.
Based solely on its review of the copies of such forms received by it, and
written representations from certain reporting persons that no Forms 5 were
required for those persons, the Corporation believes that during the period
January 1, 1997, through December 31, 1997, its officers, directors and 5%
shareholders were in compliance with all applicable filing requirements.
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<PAGE>
EXECUTIVE COMPENSATION
Information concerning the annual compensation for services in all capacities
to the Corporation for the fiscal years ended December 31, 1997, 1996 and 1995
of those persons who were, as of December 31, 1997, (i) the Chief Executive
Officer, and (ii) the four other most highly compensated executive officers of
the Corporation to the extent that such persons' total annual salary and bonus
exceeded $100,000 is set forth below.
Summary Compensation Table
<TABLE>
Long Term Compensation
Awards Payouts
Annual Compensation Restricted Securities All Other
Name and Salary Other Annual Stock Underlying LTIP Compensation
Principal ($) Bonus Compensation Award(s) Options/SARs Payouts ($)
Position Year (1) ($) ($) ($) (#) ($) (2)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Richard E. Wilber 1997 $127,543 $9,583 None None None None $10,930
President and CEO 1996 $127,582 $8,028 $10,730
1995 $117,107 $6,329 $8,345
</TABLE>
(1) The "Salary" column includes fees paid to Mr. Wilber as a director of the
Corporation and of the Bank totaling $10,130, $8,930 and $8,475 for years
1997, 1996 and 1995, respectively.
(2) Includes $9,583, $8,028 and $6329 for tax deferred profit sharing
contribution paid by the Bank in the respective years of 1997, 1996 and
1995.
Includes $1,146, $1,016 and $957 for imputed income on life insurance in
the respective years of 1997, 1996 and 1995.
Includes $201, $1,686 and $1,059 for taxable spousal/family expenses in
the respective years of 1997, 1996 and 1995.
Employment Contract
On April 16, 1996, the Corporation and Mr. Richard E. Wilber, President of the
Corporation and of the Bank, entered into an employment agreement (the
"Agreement"). The employment agreement sets forth the benefits to which Mr.
Wilber is entitled in the event of termination of Mr. Wilber's employment. If
Mr. Wilber's employment is terminated without "Cause" (as defined in the
Agreement), Mr. Wilber becomes entitled to severance benefits under the
Agreement. Depending upon the reason for Mr. Wilber's termination (as
"termination" is defined in the Agreement), Mr. Wilber would receive a
lump-sum payment in cash and be entitled to remain a participant in any health
and accident, disability and life insurance plan of the Corporation or of the
Bank, in which he was a participant on his date of termination. If such
participation violates provisions of any such plan or policy, then the
Corporation would pay Mr. Wilber, on a monthly basis, a sum equal to the
premiums that the Corporation would have paid on his behalf. The Agreement
provides that Mr. Wilber will be entitled to only those pension and profit
sharing benefits that have accrued prior to his termination.
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<PAGE>
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 during the highest five consecutive years within the final ten
years of employment. The Bank's funding policy is consistent with the funding
requirements of Federal law and regulations. The First Citizens National Bank
Trust Department is trustee of the pension plan.
The following table sets forth the estimated annual benefits payable on
retirement at age 65 by a participating employee, assuming final average
earnings as shown. This table reflects the benefit available through the
pension plan exclusive of social security. Because of funding limitations by
the Internal Revenue Service, no contributions were allowed in 1997. Such
funding limitations did not apply in 1996 and the Bank contributed the maximum
allowed of $116,011.
Average Annual Annual Pension Benefits Upon Retirement
Earnings with Years of Service Indicated
10 20 30 40
--- --- --- ---
$60,000 9,802 19,604 29,407 29,407
$80,000 13,802 27,604 41,407 41,407
$100,000 17,802 35,604 53,407 53,407
$120,000 21,802 43,604 65,407 65,407
$140,000 25,802 51,604 77,407 77,407
$160,000 29,802 59,604 89,407 89,407
$180,000 29,802 59,604 89,407 89,407
Richard E. Wilber, President and Chief Executive Officer of the Corporation,
has 16 years of credited service to the Corporation and Bank. Average salary
upon which benefits would be calculated at December 31, 1997 is $124,204.
Profit Sharing Plan
The Bank has a profit-sharing plan, covering substantially all employees,
which provides tax deferred salary savings to plan participants.
Contributions to the profit-sharing plan are allocated to participants based
upon a percentage of their compensation. The total amount of the
profit-sharing contribution is determined by the Board of Directors annually
on a discretionary basis. Total contributions for 1997, 1996 and 1995 were
$186,705, $130,820 and $86,239, respectively. As reported in the Summary
Compensation Table, the contributions paid by the Bank on behalf of Richard E.
Wilber, President and Chief Executive Officer of the Corporation, were $9,583
in 1997, $8,028 in 1996 and $6,329 in 1995.
Compensation of Directors
Directors of the Corporation, except for the Chairman, receive a fee of $125
per meeting. Directors of the Bank, except for the Chairman, receive $495 per
month plus fees of $95 per meeting, for attendance at various committee
meetings. The Chairman receives a fixed annual sum of $12,501. In addition
to these fees, each director is provided a $50,000 life insurance benefit. In
the aggregate, the Board of Directors received $99,727 for all Board of
Directors meetings, of the Corporation, of the Bank and committee meetings
attended, in 1997. Total premiums paid, in 1997, for life insurance on behalf
of the directors was $1,783.
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Compensation Committee Interlocks and Insider Participation
Mr. Richard E. Wilber, President and Chief Executive Officer of the
Corporation and of the Bank, is a member of the Human Resource Committee which
makes recommendations on compensation policies and practices to the Board of
Directors. Mr. Wilber does not participate in conducting his review nor does
he vote on his annual compensation package.
Board of Directors Report on Executive Compensation
The Board of Directors of the Corporation is responsible for the governance of
the Corporation and its subsidiary, First Citizens National Bank. In
fulfilling its fiduciary duties, the Board of Directors engages competent
persons who undertake to accomplish strategic goals and objectives with
integrity and in a cost-effective manner.
The Human Resource Committee, comprised of the President and three outside
directors (Directors Novak, Croft and Adams), makes recommendations on
compensation policies and practices to the Board of Directors. The
fundamental philosophy of the Corporation's and the Bank's compensation
program is to offer competitive compensation opportunities for all employees
based on the individual's contribution and personal performance. Compensation
policies are designed to attract and motivate competent and dedicated
individuals to enhance the Corporation's growth and profitability and the
ultimate financial return to shareholders.
The compensation of the President and of the Executive Vice President is
reviewed and approved in April of each year by the Board of Directors. As a
basis for determining compensation, the Board of Directors examines
information from a peer group of banks relative to performance and
compensation. The peer group for overall bank performance analysis consists
primarily of those contained within the Uniform Bank Performance Report
prepared by the Office of the Comptroller of the Currency (banks with assets
of $100 million to $300 million throughout the United States). The peer group
for analysis of compensation paid to other bank holding company and banking
institution executives is obtained primarily from L.R. Weber Associates, Inc.
and Bank Administration Institute (such peer data is compiled on both a
regional and asset size basis). These peer groups are different from the peer
group utilized in the performance chart appearing below.
The Board of Directors does not deem Section 162(m) of the Internal Revenue
Code ("IRC") to be applicable to the Corporation at this time. The Board of
Directors intends to monitor the future application of Section 162(m) of the
IRC to the compensation paid to its executive officers and in the event that
this section does become applicable it is the intent of the Board of Directors
to amend the Corporation's and the Bank's compensation plans to preserve the
deductibility of the compensation payable under such plans.
Compensation of the President/Executive Vice President
As mentioned previously, the Board of Directors evaluated the compensation of
the President and the Executive Vice President in April 1997. Compensation
increases were determined based on an analysis of the contribution of these
individuals in achieving the Corporation's strategic goals and objectives. In
determining whether strategic goals had been achieved, the Board of Directors
considered, among numerous factors, the following: the Corporation's
performance as measured by earnings, revenues, return on assets, return on
equity, market share, total assets and non-performing loans. Although the
performance and increases in compensation were measured in light of these
factors, there was no direct correlation between any specific criterion and
compensation of these executives, nor was there any specific weight provided
to any such criteria.
The Board of Directors believes that the President's 1997 compensation of
$117,413 is appropriate in light of the Corporation's 1997 accomplishments (an
8% increase in net income and a 13.9% return on average equity,exclusive of
the arbitration award, and a 4.2% increase in assets). In addition to this
compensation, the President and Executive Vice President participate in the
Bank's profit-sharing plan on the same basis as all other eligible employees.
HUMAN RESOURCE COMMITTEE
Richard E. Wilber John E. Novak Larry J. Croft Bruce L. Adams
Page 9
<PAGE>
SHAREHOLDER RETURN PERFORMANCE GRAPH
Set forth below is a line graph comparing the yearly change in the cumulative
total return on the Corporation's Common Stock against the cumulative total
return of the S&P 500 Index and selected peer groups for the period of five
(5) years commencing on January 1, 1992, and ended December 31, 1997.
Shareholder return shown on the graph below is not necessarily indicative of
future performance.
________________________________________________________________________________
[PERFORMANCE GRAPH OMITTED. Following is a description of the performance graph
in tabular format.]
1992 1993 1994 1995 1996 1997
Peer Group Index 100.00 139.06 166.08 189.52 233.82 340.97
Citizens Financial 100.00 119.31 161.75 173.34 199.58 301.50
Services, Inc.
S&P 500 Index 100.00 110.02 111.51 153.26 188.36 251.12
________________________________________________________________________________
NOTE:Peer group information appearing above includes the following companies:
CNB Financial Corporation, Citizens & Northern Corporation, Columbia Financial
Corporation, Comm. Bancorp, Inc., Mid Penn Bancorp, Inc., Heritage Bancorp,
Inc., Penn Security Bank & Trust Co., Penns Woods Bancorp, Inc., Pioneer
American Holding Company, and Norwood Financial Corporation. Such financial
institutions and bank holding companies were selected based on four criteria:
total assets between $150 million and $650 million, market capitalization
greater than $20 million; headquarters located in Pennsylvania; and not listed
on NASDAQ national market.
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CERTAIN TRANSACTIONS
Certain of the Corporation's Directors and Executive Officers and their
associates are and have been customers of the Bank and have had transactions
with the Bank in the ordinary course of business. In addition, certain
Directors are and have been Directors and Officers of corporations which are
customers of the Bank and have had transactions with the Bank in the ordinary
course of business. All such transactions with these Directors and Officers
of the Corporation and their associates referred to above were made on
substantially the same terms (including interest rates and collateral) as
those prevailing at the time of such transactions. These transactions did not
involve more than a normal risk of collectibility or present other unfavorable
features.
During 1997, business and law firms of which Directors Rudolph J. van der Hiel
and R. Lowell Coolidge were Officers and/or Partners rendered services or sold
products to the Corporation and/or the Bank in the normal course of business.
Directors Rudolph J. van der Hiel and R. Lowell Coolidge each received
$5,984.52 and $25,856.25, respectfully, for all legal services rendered to the
Corporation and/or Bank during 1997. Also during 1997, Dalton Insurance
Agency was paid $81,261.00 in premiums for various insurance coverages for the
Corporation and the Bank.
Total loans outstanding from the Corporation and the Bank at December 31,
1997, 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 ten percent (10%) or more was $2,230,952, or
approximately nine percent (9%) 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 collectibility or present
other unfavorable features. The aggregate amount of indebtedness outstanding
as of the latest practicable date, February 28, 1998, to the above described
group was $1,854,476.07.
PROPOSED AMENDMENT TO ARTICLE 4 OF THE
ARTICLES OF INCORPORATION, AS AMENDED,
TO INCREASE THE NUMBER OF
AUTHORIZED SHARES OF COMMON STOCK
The Articles of Incorporation of the Corporation, as amended, currently
authorize five million (5,000,000) shares of Common Stock, par value $1.00 per
share. As of March 18, 1998, there were 2,746,564 shares of Common Stock
issued and outstanding. The Corporation thus has only a limited number of
authorized but unissued shares available for issuance, from time to time, as
may be necessary in connection with future financings, investment
opportunities, acquisitions of other companies, the declaration of stock
dividends, stock splits or other distributions, or for other corporate
purposes.
Accordingly, on February 3, 1998, the Board of Directors of the Corporation
approved resolutions to amend Article 4 of the Corporation's Articles of
Incorporation, as amended, to increase the number of authorized shares of
Common Stock from 5,000,000 shares to 10,000,000 shares. The increase in the
number of authorized shares of Common Stock requires that the shareholders
approve and adopt the proposed amendment to the Corporation's Articles of
Incorporation, as amended. A true and correct copy of the proposed amendment
to Article 4 of the Corporation's Articles of Incorporation, as amended, and
the resolutions approved and adopted by the Board of Directors are set forth
below:
WHEREAS, the Board of Directors desires and finds that it is in the best
interests of the Corporation and its shareholders to increase the number of
authorized shares of the Corporation's Common Stock, par value $1.00 per
share, from 5,000,000 shares to 10,000,000 shares, in order to provide the
Corporation with as much flexibility as possible to issue additional shares of
Common Stock for proper corporate purposes, including financings,
acquisitions, stock splits, stock dividends, employee incentive plans, and
other similar purposes; and
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NOW, THEREFORE, BE IT RESOLVED, that in accordance with Sections 1911, 1912,
1914, 1915 and 1916 of the Business Corporation Law of 1988, as amended, the
Board of Directors hereby approves and adopts the following proposed amendment
to the Corporation's Articles of Incorporation, as amended, and hereby directs
that the following proposed amendment to the Articles of Incorporation, as
amended, of this Corporation be submitted to the shareholders of the
Corporation for their approval and adoption at the 1998 Annual Meeting of
Shareholders of the Corporation to be held on April 21, 1998, at 12:00 p.m.,
prevailing time, at Tioga County Fairgrounds Youth Building, Whitneyville,
Pennsylvania 16901, to wit:
Article 4 of the Articles of Incorporation, as amended, of Citizens Financial
Services, Inc. is amended and restated to read in full and in its entirety as
follows:
4.The aggregate number of shares which the Corporation shall have authority to
issue is 10,000,000 shares of Common Stock of the par value of $1.00 per share
(the "Common Stock").
BE IT FURTHER RESOLVED, that after approval and adoption of the aforesaid
amendment of the Articles of Incorporation of the Corporation by the
shareholders of the Corporation at the 1998 Annual Meeting of Shareholders,
the President and Secretary or a Vice President and an Assistant Secretary, of
the Corporation are hereby authorized, empowered and directed to execute and
file Articles of Amendment containing said amendment with the Commonwealth of
Pennsylvania, Department of State, Corporation Bureau, and upon such filing
said amendment shall be effective.
Except as described in this section of the Proxy Statement, the Corporation
has no present plans, understandings or arrangements for issuing the
additional shares to be authorized by the proposed amendment. The Board of
Directors believes that it is advisable to have authorization for such
additional shares in order to enable the Corporation, as the need may arise,
to take prompt advantage of market conditions and the availability of
favorable opportunities for the acquisition of other companies without the
delay and expense incident to the holding of a special meeting of shareholders
of the Corporation. The future issuance by the Corporation of shares of
Common Stock may dilute the present equity ownership position of current
holders of the Common Stock. The proposed amendment is not intended to have
an anti-takeover effect. The issuance, however, of any of the shares proposed
to be authorized, as well as currently authorized but unissued shares, may
potentially have an anti-takeover effect by making it more difficult to obtain
shareholder approval of actions such as certain business combinations or
removal of management.
The proposed amendment, if adopted by the shareholders, would increase the
number of authorized but unissued shares of Common Stock of the Corporation
from 5,000,000 shares to 10,000,000 shares. The unissued shares of Common
Stock will be available for issuance at the discretion of the Board of
Directors from time to time for any proper corporate purposes generally
without further action of the shareholders upon the affirmative vote of a
majority of the members of the Board of Directors. If the proposed amendment
is adopted by the shareholders, the Board of Directors is not likely to
solicit shareholder approval to issue the additional authorized shares, except
to the extent that such approval may be required by law, regulation or any
agreement governing the trading of the Corporation's stock.
As a result, the Board of Directors proposes that Article 4 of the amended
Articles of Incorporation of Citizens Financial Services, Inc. be amended and
restated to read in full and in its entirety as set forth above and that the
shareholders approve and adopt the following resolution:
RESOLVED, that the proposed amendment to Article 4 of the Corporation's
Articles of Incorporation, as amended, and as set forth in its entirety above,
be and hereby is, approved, adopted, ratified and confirmed.
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The affirmative vote of a majority of the votes cast by all shareholders
entitled to vote thereon is required to approve and adopt this amendment to
the Corporation's Articles of Incorporation, as set forth above.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE PROPOSAL TO AMEND
THE CORPORATION'S ARTICLES OF INCORPORATION TO INCREASE THE NUMBER OF
AUTHORIZED SHARES OF COMMON STOCK FROM FIVE MILLION TO TEN MILLION.
PROPOSAL TO APPROVE AND ADOPT
AN AMENDMENT AND RESTATEMENT OF
ARTICLE 13 OF THE ARTICLES OF INCORPORATION
OF THE CORPORATION, AS AMENDED,
TO ELIMINATE PREEMPTIVE RIGHTS
On February 3, 1998, the Board of Directors unanimously approved and adopted
resolutions amending and restating Article 13 of the Articles of Incorporation
of the Corporation, as amended, to provide that preemptive rights shall not
exist with respect to the Corporation's securities. A true and correct copy
of the proposed amendment to Article 13 of the Corporation's amended Articles
of Incorporation and the resolutions approved and adopted by the Board of
Directors are set forth below:
WHEREAS, the Board of Directors believes that it would be in the best
interests of the Corporation and of its subsidiary to amend the Corporation's
amended Articles of Incorporation to delete current Article 13, which
authorizes preemptive rights for shareholders, and to insert new Article 13
that specifically negates preemptive rights, because such an amendment would
increase the Corporation's flexibility in raising capital.
NOW, THEREFORE, BE IT RESOLVED, that in accordance with Sections 1911, 1912,
1914, 1915 and 1916 of the Business Corporation Law of 1988, as amended, the
Board of Directors hereby approves and adopts the following proposed amendment
to the Corporation's Articles of Incorporation, as amended, and hereby directs
that the following proposed amendment to the Articles of Incorporation, as
amended, of the Corporation be submitted to the shareholders of the
Corporation for their approval and adoption at the 1998 Annual Meeting of
Shareholders of the Corporation to be held on April 21, 1998, at 12:00 p.m.,
prevailing time, at Tioga County Fairgrounds Youth Building, Whitneyville,
Pennsylvania 16901, to wit:
Current Article 13 of the Articles of Incorporation, as amended, of Citizens
Financial Services, Inc. is hereby deleted and new Article 13 is hereby
approved, adopted, inserted and provided for, so that Article 13, as amended,
shall read in full and in its entirety as follows:
13.Preemptive Rights
No shareholder of this Corporation shall be entitled to preemptive rights and
preemptive rights shall not exist with respect to shares or securities of this
Corporation.
BE IT FURTHER RESOLVED, that after approval and adoption of the aforesaid
amendment of the Articles of Incorporation by the shareholders of the
Corporation at the 1998 Annual Meeting of Shareholders, the President and
Secretary, or a Vice President and an Assistant Secretary, of the Corporation
are hereby authorized, empowered and directed to execute and file Articles of
Amendment containing said amendment with the Commonwealth of Pennsylvania,
Department of State, Corporation Bureau, and upon such filing, said amendment
shall be effective.
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<PAGE>
The proposed amendment and restatement of Article 13, if adopted by the
shareholders, would eliminate the preemptive right of shareholders to
subscribe for additional shares on a pro rata basis and will provide the Board
of Directors with more flexibility to issue additional shares, without further
shareholder approval, for proper Corporate purposes, including financing,
acquisitions, stock dividends, stock splits, employee incentive plans or other
similar purposes. The elimination of preemptive rights could result in a
dilution of a shareholder's ownership interest in the Corporation. Additional
shares may also be used by the Board of Directors (if consistent with
fiduciary responsibilities) to deter future attempts to gain control over the
Corporation. The Board of Directors believes that this amendment is desirable
in order to increase the Corporation's existing anti-takeover protection and
to provide greater flexibility to the Board of Directors to issue additional
shares for proper corporate purposes.
The Board of Directors proposes that Article 13 of the Corporation's amended
Articles of Incorporation be amended and restated to read in full and in its
entirety as set forth above and that the shareholders approve and adopt the
following resolution:
RESOLVED, that the proposed amendment to Article 13 of the Corporation's
Articles of Incorporation, as amended, and as set forth in its entirety above,
be and hereby is, approved, adopted, ratified and confirmed.
The affirmative vote of a majority of the votes cast by all shareholders
entitled to vote thereon is required to approve and adopt this amendment to
the Corporation's Articles of Incorporation set forth above.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE PROPOSAL TO AMEND
THE CORPORATION'S ARTICLES OF INCORPORATION TO ELIMINATE PREEMPTIVE RIGHTS.
Principal Officers of Corporation
The following table sets forth the selected information about the Executive
Officers of the Corporation, as of March 11, 1998. Please refer to the
footnotes below under the caption entitled "Principal Officers of First
Citizens National Bank."
Held Employee Number of Shares Age as of
Name and Position Since Since Beneficially Owned March 11, 1998
Richard E. Wilber 1984 1984 9,338 49
President
Terry B. Osborne 1984 1984 901 (2) 44
Secretary
Thomas C. Lyman 1988 1988 4 52
Treasurer
Each of the above Executive Officers has served in these capacities for the
past five years.
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Principal Officers of First Citizens National Bank
The following table sets forth the selected information about the Executive
Officers of First Citizens National Bank, subsidiary of the Corporation, as of
March 11, 1998:
Held Employee Number of Shares Age as of
Name and Position Since Since Beneficially Owned March 11, 1998
Robert E. Dalton 1985 (1) 31,588 65
Chairman of the Board
Richard E. Wilber 1983 1981 9,338 49
President
Terry B. Osborne 1991 1975 901 (2) 44
Executive Vice
President
Thomas C. Lyman 1988 1988 4 52
Assistant Vice
President
Finance/Control
Division Manager
William W. Wilson 1991 1979 346 (3) 48
Vice President
Operations Division
Manager
Cynthia T. Pazzaglia 1985 1983 905 (4) 39
Assistant Vice
President
Administrative
Services Division
Manager
(1) Is not an employee of First Citizens National Bank.
(2) Mr. Osborne holds 721 shares jointly with his spouse, 48 shares in his
name alone, 132 shares held by his spouse.
(3) Mr. Wilson holds 346 shares jointly with his spouse.
(4) Mrs. Pazzaglia holds 905 shares jointly with her spouse.
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ANNUAL REPORT
A copy of the Corporation's Annual Report for its fiscal year ended December
31, 1997, is enclosed with this Proxy Statement.
INDEPENDENT PUBLIC ACCOUNTANTS
S.R. Snodgrass, A.C. ("Snodgrass"), Certified Public Accountants, of Wexford,
Pennsylvania, served as the Corporation's independent public accountants for
its 1997 fiscal year. The Corporation has been advised by Snodgrass that none
of its members has any financial interest in the Corporation. In addition to
performing customary audit services, Snodgrass assisted the Corporation and
the Bank with preparation of their federal and state tax returns, and provided
assistance in connection with regulatory matters, charging the Bank for such
services at its customary hourly billing rates. These non-audit services were
approved by the Corporation's and the Bank's Boards of Directors after due
consideration of the effect of the performance thereof on the independence of
the auditors and after the conclusion by the Corporation's and the Bank's
Boards of Directors that there was no effect on the independence of the
auditors. Snodgrass will serve as the Corporation's independent public
accountants for its 1998 fiscal year. A representative of S.R. Snodgrass will
be present at the Annual Meeting of Shareholders. The representative will
have an 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
1999, must be submitted to the President of Citizens Financial Services, Inc.,
at its principal office of 15 South Main Street, Mansfield, Pennsylvania 16933
on or before Wednesday, November 18, 1998, in order to be included in proxy
materials relating to that Annual Meeting.
OTHER MATTERS
The Board of Directors of the Corporation is not aware of any other matters to
be presented for action other than described in the accompanying Notice of
Annual Meeting of Shareholders, but if any other matters properly come before
the Meeting, and any adjournments or postponements thereof, the holder(s) of
any Proxy is (are) authorized to vote thereon in accordance with their best
judgment.
ADDITIONAL INFORMATION
Upon written request of any shareholder, a copy of the Corporation's Annual
Report on SEC Form 10-K for its fiscal year ended December 31, 1997, 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 Thomas C. Lyman, Treasurer, Citizens Financial Services, Inc., 15 South
Main Street, Mansfield, Pennsylvania 16933.
Next year's Annual Meeting is scheduled to be held on Tuesday, April 20, 1999.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Richard E. Wilber
Richard E. Wilber
President
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CITIZENS FINANCIAL SERVICES, INC.
PROXY
ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON APRIL 21, 1998
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby constitutes and appoints Terry B. Osborne and Jerald J.
Rumsey and each or any of them, proxies of the undersigned, with full power of
substitution, to vote all of the shares of Citizens Financial Services, Inc.
(the "Corporation") that the undersigned may be entitled to vote at the Annual
Meeting of Shareholders of the Corporation to be held at the Tioga County
Fairgrounds Youth Building, Whitneyville, Pennsylvania 16901, on Tuesday,
April 21, 1998 at 12:00 p.m., prevailing time, and at any adjournment or
postponement thereof as follows:
1. ELECTION OF CLASS 2 DIRECTORS TO SERVE FOR A THREE-YEAR TERM
John E. Novak, Rudolph J. van der Hiel and Mark L. Dalton
_____ For all nominees _____ WITHHOLD AUTHORITY
listed above (except to vote for all nominees
as marked to the listed above
contrary below)
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, WRITE
THAT NOMINEE'S NAME ON THE SPACE PROVIDED BELOW.)
________________________________
2. Proposal to amend Article 4 of the Corporation's Articles of Incorporation,
as amended, to increase the number of authorized shares of the Corporation's
Common Stock, par value $1.00 per share, from 5,000,000 shares to 10,000,000
shares.
_____ FOR _____ AGAINST _____ ABSTAIN
The Board of Directors unanimously recommends a vote FOR this proposal.
3. Proposal to amend Article 13 of the Corporation's Articles of Incorporation,
as amended, to eliminate preemptive rights.
_____ FOR _____ AGAINST _____ ABSTAIN
The Board of Directors unanimously recommends a vote FOR this proposal.
4. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting and any adjournment or
postponement thereof.
THIS PROXY, WHEN PROPERLY SIGNED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR ALL NOMINEES LISTED ABOVE AND FOR PROPOSALS 2 AND 3.
Dated: _____________, 1998
___________________________
Number of Shares Held of
Record on March 18, 1998 ___________________________
Indicated Above Signature(s) (Seal)
THIS PROXY MUST BE DATED, SIGNED BY THE SHAREHOLDER AND RETURNED PROMPTLY TO
THE CORPORATION IN THE ENCLOSED ENVELOPE. WHEN SIGNING AS ATTORNEY, EXECUTOR,
ADMINISTRATOR, TRUSTEE OR GUARDIAN, PLEASE GIVE FULL TITLE. IF MORE THAN ONE
TRUSTEE, ALL SHOULD SIGN. IF STOCK IT IS HELD JOINTLY, EACH OWNER SHOULD SIGN.
