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:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)2))
[xx] 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 filing fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i) (4) 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 transaction computed
purusant to Exchange Act Rule 0-11 (Set forth the amount on 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 previously. 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 20, 1999
-----------------------------
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 20, 1999 at the Tioga County Fairgrounds
Youth Building, Whitneyville, Pennsylvania, 16901, for the following purposes:
1. To elect five (5) Class 1 Directors to serve for a three-year term
and until their successors are elected and qualified.
2. 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
10, 1999 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, 1998 is enclosed with this Notice. Copies of the Corporation's Annual
Report for the 1997 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 17, 1999
<PAGE>
CITIZENS FINANCIAL SERVICES,INC.
PROXY STATEMENT FOR THE ANNUAL MEETING OF
SHAREHOLDERS TO BE HELD ON APRIL 20, 1999
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 20, 1999 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 17,
1999.
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 1 Director named below to serve for a
three-year term and until their successors are elected and qualified, 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.
Page -1-
<PAGE>
Voting Securities, Record Date and Quorum
- -----------------------------------------
At the close of business on March 10, 1999, the Corporation had outstanding
2,773,434 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 10,
1999 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 five (5) 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.
PRINCIPAL BENEFICIAL OWNERS OF THE CORPORATION'S STOCK
Principal Owners
- ----------------
The following table sets forth, as of March 5, 1999, 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 Beneficially Owned (1) Beneficially Owned
- ---------------- ---------------------- ----------------------
R. Lowell Coolidge
Post Office Box 41 139,842 5.04%
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 5, 1999. Beneficial ownership may be disclaimed as to
certain of the securities.
Page -2-
<PAGE>
Beneficial Ownership by Officers, Directors and Nominees
- --------------------------------------------------------
The following table sets forth as of March 5, 1999, 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 of Beneficial Amount and Nature of
Owner Beneficial Ownership (1) Percent of Class
------------------- ------------------------ ----------------
CURRENT CLASS 1 DIRECTORS WHOSE TERM EXPIRES IN 1999 AND
NOMINEES FOR CLASS 1 DIRECTOR WHOSE TERM EXPIRES IN 2002
Carol J. Tama 69,745 2.51%
R. Lowell Coolidge 139,842 (2) 5.04%
John M. Thomas, M.D. 45,906 (3) 1.66%
Larry J. Croft 26,708 (4) .96%
Richard E. Wilber 8,248 (5) .30%
CURRENT CLASS 3 DIRECTORS WHOSE TERM EXPIRES IN 2000
Bruce L. Adams 4,289 (6) .15%
William D. Van Etten 5,797 (7) .21%
CURRENT CLASS 2 DIRECTORS WHOSE TERM EXPIRES IN 2001
John E. Novak 3,306 (8) .12%
Rudolph J. van der Hiel 17,139 (9) .62%
Mark L. Dalton 875 .03%
All Nominees, Directors and
Executive Officers as a Group
- 14 persons 324,137 11.69%
(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 5, 1999.
Beneficial ownership may be disclaimed as to certain of the securities.
(2) Mr. Coolidge holds 111,573 shares individually, 28,269 shares are held by
his spouse.
(3) Dr. Thomas holds 45,393 shares individually, 513 shares are held by his
spouse.
(4) Mr. Croft holds 16,896 shares individually, 9,283 shares jointly with his
spouse, 529 shares are held by his spouse.
(5) Mr. Wilber holds 6,544 shares individually, 700 shares are held jointly
with Denise Wilber, 628 shares are held by Denise Wilber, 376 shares are held
by Denise Wilber as custodian for Mr. Wilber's children.
(6) Mr. Adams holds 3,995 shares individually, 294 shares jointly with his
spouse.
(7) Mr. Van Etten holds 4,917 shares individually, 880 shares are held jointly
with his spouse.
(8) Mr. Novak holds 3,220 shares individually, 86 shares are held by his
spouse.
Page -3-
<PAGE>
(9) Mr. van der Hiel holds 15,661 shares individually, 22 shares are held
jointly with his spouse, 1,456 shares are held by 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 1 Directors elected at this Annual Meeting
will serve for a three (3) year term. The Class 3 and 2 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 five (5) 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 1 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.
All Directors have been engaged in the principal occupation indicated for five
years or more.
Page -4-
<PAGE>
Principal Occupation
for Past Five Years
and Position Held with the Director Since
Name Age Corporation and the Bank Corporation/Bank
---- --- -------------------------- ----------------
CURRENT CLASS 1 DIRECTORS WHOSE TERM EXPIRES IN 1999
AND NOMINEES FOR CLASS 1 DIRECTOR WHOSE TERM EXPIRES IN 2002
Carol J. Tama 58 President of Monaghan Transportation 1986
Company (1984)
R. Lowell Coolidge 58 Attorney-at-Law with the firm of 1984
Walrath and Coolidge (1984)
Richard E. Wilber 50 President of Citizens Financial 1984
Services, Inc. and First (1983)
Citizens National Bank
John M. Thomas, M.D. 65 Retired Executive Chairman of Guthrie 1990
Healthcare System; President of (1985)
Chemung Spring Water Company
Larry J. Croft 63 Owner of Croft Ford, Inc. 1990
(1969)
CURRENT CLASS 3 DIRECTORS WHOSE TERM EXPIRES IN 2000
Bruce L. Adams 62 Past President of Bru-Cel Distributing 1991
Co., Inc. (1991)
William D. 65 Dairy Farmer 1984
Van Etten (1978)
CURRENT CLASS 2 DIRECTORS WHOSE TERM EXPIRES IN 2001
John E. Novak 62 Retired School Administrator with 1984
Southern Tioga School District; (1976)
since 1993 has supervised Student
Teachers at Elmira College
Rudolph J. van 59 Attorney-at-Law with the Law Offices 1984
der Hiel of van der Hiel & Chappell; (1975)
Vicar at St. James Episcopal Church,
Mansfield and Trinity Episcopal Church,
Wellsboro
Mark L. Dalton 44 Principal owner of Robert E. Dalton 1998
General Insurance (1997)
Page -5-
<PAGE>
THE BOARD OF DIRECTORS AND ITS COMMITTEES
During 1998, there were eight (8) regular meetings of the Board of Directors
of the Corporation and twenty four (24) 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 five
percent (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 five
percent (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, 1998, through December 31, 1998, its officers, directors and five
percent (5%) shareholders were in compliance with all applicable filing
requirements.
Page -6-
<PAGE>
EXECUTIVE COMPENSATION
Information concerning the annual compensation for services in all capacities
to the Corporation for the fiscal years ended December 31, 1998, 1997 and 1996
of those persons who were, as of December 31, 1998, (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 $100,000 is set forth below.
Summary Compensation Table
- --------------------------
<TABLE>
Long Term Compensation
Annual Compensation Awards Payouts All Other
Compensation
Name and Restricted Securities
Principal Year Stock Underlying LTIP
Position Salary Bonus Other Annual Award(s) Options/SARs Payouts
($) ($) Compensation ($) (#) ($)
(1) ($)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Richard E. Wilber 1998 $145,506 $7,304 None None None None $9,032
President & CEO 1997 $127,543 $9,583 $10,930
1996 $127,582 $8,028 $10,730
</TABLE>
(1) The "Salary" column includes fees paid to Mr. Wilber as a director of the
Corporation and of the Bank totaling $10,606, $10,130 and $8,930 for years
1998, 1997 and 1996, respectively.
(2) Includes $7,304, $9,583 and $8,028 for tax deferred profit sharing
contribution paid by the Bank in the respective years of 1998, 1997 and 1996.
Includes $1,728, $1,146 and $1,016 for imputed income on life insurance in the
respective years of 1998, 1997 and 1996.
Includes $201 and $1,686 for taxable spousal/family expenses in the respective
years of 1997 and 1996. There was no monies paid out for 1998.
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.
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
Page -7-
<PAGE>
consistent with the funding requirements of Federal law and regulations. The
First Citizens National Bank Trust and Investment Services 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 1998 and 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 9,665 19,331 28,996 28,996
$80,000 13,665 27,331 40,996 40,996
$100,000 17,665 35,331 52,996 52,996
$120,000 21,665 43,331 64,996 64,996
$140,000 25,665 51,331 76,996 76,996
$160,000 29,665 59,331 88,996 88,996
$180,000 29,665 59,331 88,996 88,996
Richard E. Wilber, President and Chief Executive Officer of the Corporation,
has 17 years of credited service to the Corporation and Bank. Average salary
upon which benefits would be calculated at December 31, 1998 is $134,253.
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 1998, 1997 and 1996 were
$128,066, $186,705 and $130,820, 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 $ 7,304
in 1998, $9,583 in 1997 and $8,028 in 1996.
Compensation of Directors
- -------------------------
Directors of the Corporation, except for the Chairman, receive a fee of $130
per meeting. Directors of the Bank, except for the Chairman, receive $515 per
month plus fees of $100 per meeting, for attendance at various committee
meetings. The Chairman receives a fixed annual sum of $13,000. Directors are
permitted to defer their fees subject to provisions of the directors deferred
compensation plan. The plan provides for the bank to distribute funds to a
director whenever they are no longer a member of the board. In addition to
these fees, each director is provided a $50,000 life insurance benefit. Once
a director retires, insurance coverage continues but the benefit declines as
the age of the retired director increases. In the aggregate, the Board of
Directors received $103,261 for all Board of Directors meetings, of the
Corporation, of the Bank and committee meetings attended, in 1998. Total
premiums paid, in 1998, for life insurance on behalf of the current and
retired directors was $1,859.
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.
Page -8-
<PAGE>
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 1998. 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 1998 compensation of
$134,901 is appropriate in light of the Corporation's 1998 accomplishments (a
2% increase in net income [when adjusting 1998 and 1997 for securities gains,
extraordinary items and the arbitration award] and a 13% return on average
equity, exclusive of the arbitration award, and a 6.4% 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, 1993, and ended December 31, 1998.
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.]
1993 1994 1995 1996 1997 1998
---- ---- ---- ---- ---- ----
Peer Group Index 100.00 120.41 137.49 171.69 236.52 280.21
Citizens Financial 100.00 135.56 145.11 167.12 252.04 332.64
Services, Inc.
S&P 500 Index 100.00 99.26 139.31 171.21 228.26 293.36
________________________________________________________________________________
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., Juniata Valley
Financial Corp., Penseco Financial Services Corp., 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.
Page -10-
<PAGE>
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 1998, 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
$8,383.58 and $9,884.57, respectfully, for all legal services rendered to the
Corporation and/or Bank during 1998. Also during 1998, Dalton Insurance
Agency was paid $97,635.00 in premiums for various insurance coverages for the
Corporation and the Bank.
Total loans outstanding from the Corporation and the Bank at December 31,
1998, 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 $2,501,168, or
approximately ten percent (10%) 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, 1999, to the above described
group was $2,787,369.
Principal Officers of Corporation
- ---------------------------------
The following table sets forth the selected information about the Executive
Officers of the Corporation, as of March 5, 1999. Please refer to the
footnotes below under the caption entitled "Principal Officers of First
Citizens National Bank."
Number of Shares Age as of
Name and Position Held Since Employee Since Beneficially Owned March 5, 1999
- -----------------------------------------------------------------------------
Richard E. Wilber 1984 1984 8,248 50
President
Terry B. Osborne 1984 1984 941 (2) 45
Secretary
Thomas C. Lyman 1988 1988 9 53
Treasurer
Each of the above Executive Officers has served in these capacities for the
past five years.
Page -11-
<PAGE>
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 5, 1999:
Number of Shares
Beneficially Age as of
Name and Position Held Since Employee Since Owned March 5, 1999
- -------------------------------------------------------------------------------
R. Lowell Coolidge 1984 (1) 139,842 58
Chairman of the Board
Richard E. Wilber 1983 1981 8,248 50
President
Terry B. Osborne 1991 1975 941 (2) 45
Executive Vice President
Thomas C. Lyman 1988 1988 9 53
Assistant Vice President
Finance/Control Division Manager
William W. Wilson 1991 1979 349 (3) 49
Vice President
Operations Division Manager
Cynthia T. Pazzaglia 1985 1983 983 (4) 40
Assistant Vice President
Administrative Services Division Manager
(1) Is not an employee of First Citizens National Bank.
(2) Mr. Osborne holds 760 shares jointly with his spouse, 48 shares in his
name alone, 133 shares held by his spouse.
(3) Mr. Wilson holds 349 shares jointly with his spouse.
(4) Mrs. Pazzaglia holds 983 shares jointly with her spouse.
Page -12-
<PAGE>
ANNUAL REPORT
A copy of the Corporation's Annual Report for its fiscal year ended December
31, 1998, 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 1998 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 1999 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
2000, 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 17, 1999, 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, 1998, 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 18, 2000.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Richard E. Wilber
Richard E. Wilber
President
Page -13
<PAGE>
CITIZENS FINANCIAL SERVICES, INC.
PROXY
ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON APRIL 20, 1999
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 20, 1999 at 12:00 p.m., prevailing time, and at any adjournment or
postponement thereof as follows:
1. ELECTION OF CLASS 1 DIRECTORS TO SERVE FOR A THREE-YEAR TERM
Carol J. Tama, R. Lowell Coolidge, Richard E. Wilber, John M. Thomas, M.D.,
and Larry J. Croft
--- 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. 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.
Dated:_______________________, 1999
________________________________
Number of Shares Held of Record
on March 10, 1999 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 IS HELD JOINTLY, EACH OWNER SHOULD SIGN.
<PAGE>
