<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the 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))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
CITIZENS AND NORTHERN CORP.
- --------------------------------------------------------------------------------
(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):
/X/ No fee required
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
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 or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee 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>
[LOGO]
90-92 MAIN STREET
WELLSBORO, PENNSYLVANIA 16901
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD TUESDAY, APRIL 21, 1998
------------------------
TO THE HOLDERS OF THE COMMON STOCK OF THE CORPORATION:
Notice is hereby given that the Annual Meeting of the holders of the common
stock of Citizens & Northern Corporation (the "Corporation") will be held at the
Wellsboro Office, located at 90-92 Main Street, Wellsboro, Pennsylvania, on
Tuesday, April 21, 1998, at 2:00 P.M., local time, for the following purposes:
1. To elect five directors to Class II to serve for a term of 3 years;
2. To ratify the action of the Board of Directors in the appointment of the
firm of Parente, Randolph, Orlando, Carey & Associates as independent
auditors of the Corporation; and
3. To transact such other business as may properly be brought before the
meeting or any adjournment or adjournments thereof.
Only stockholders of record at the close of business on March 9, 1998, are
entitled to notice of, and to vote at, the meeting. Such stockholders may vote
in person or by proxy.
ALL STOCKHOLDERS ARE URGED TO COMPLETE, SIGN, DATE AND RETURN THE ENCLOSED
PROXY IN THE ACCOMPANYING ENVELOPE, WHETHER OR NOT YOU EXPECT TO ATTEND THE
MEETING. If you do attend the meeting, you may, if you wish, withdraw your proxy
and vote your shares in person.
By Order of the Board of Directors,
Kathleen M. Osgood
CORPORATE SECRETARY
March 23, 1998
<PAGE>
CITIZENS & NORTHERN CORPORATION
90-92 MAIN STREET
WELLSBORO, PENNSYLVANIA 16901
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS--APRIL 21, 1998
This proxy statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Citizens & Northern Corporation to be used
at the Annual Meeting of Stockholders of the Corporation to be held on Tuesday,
April 21, 1998, at 2:00 P.M. at the Wellsboro Office, located at 90-92 Main
Street, Wellsboro, Pennsylvania, and at any adjournment thereof. The approximate
date upon which this Proxy Statement and proxy will first be mailed to
stockholders is March 23, 1998.
The Corporation's Board of Directors is soliciting proxies in connection
with the Meeting. Shares represented by properly completed proxies will be voted
in accordance with the instructions indicated thereon unless such proxies have
previously been revoked. If no direction is indicated, such shares will be voted
in favor of the election as directors of the nominees named below, in favor of
the ratification of the appointment of the firm of Parente, Randolph, Orlando,
Carey & Associates as the Corporation's independent auditors, and in the
discretion of the proxy holder as to any other matters which may properly come
before the Meeting or any adjournment thereof. A proxy may be revoked at any
time before it is voted by written notice to the Secretary of the Corporation or
by attending the Meeting and voting in person.
The Corporation will bear the entire cost of soliciting proxies for the
Meeting. In addition to the use of the mails, proxies may be solicited by
personal interview, telephone, and telegram by the Corporation's directors,
officers and employees. Arrangements may also be made with custodians, nominees
and fiduciaries for forwarding proxy material to beneficial owners of stock held
of record by such persons, and the Corporation may reimburse such custodians,
nominees and fiduciaries for reasonable out-of-pocket expenses incurred by them
in connection therewith.
The Board of Directors has fixed the close of business on March 9, 1998, as
the record date for the determination of stockholders entitled to notice of and
to vote at the Annual Meeting and at any adjournment thereof. On the record
date, there were outstanding and entitled to vote 5,114,234 shares of Common
Stock. Common stockholders will be entitled to one vote per share on all matters
to be submitted at the meeting. The Articles of Incorporation of the Corporation
do not permit cumulative voting.
No person is known by the Corporation to have beneficially owned 5% or more
of the outstanding common stock of the Corporation as of March 9, 1998.
PROPOSAL 1--ELECTION OF DIRECTORS
The Articles of Incorporation of the Corporation provide that the Board of
Directors shall consist of not less than five nor more than twenty-five
directors and that within these limits the numbers of directors shall be as
established by the Board of Directors. The Board of Directors has set the number
of directors at fifteen. The Articles further provide that the Board shall be
classified into three classes, as nearly equal in number as possible. One class
of directors is to be elected annually. Five directors to Class II are to be
elected at the Annual Meeting to serve for a three year term. It is the
intention of the persons named as proxyholders on the enclosed form of proxy,
unless other directions are given, to vote all shares which they represent for
the election of management's nominees named in the tabulation below. Any
stockholder who wishes to withhold authority from the proxyholders to vote for
the election of directors, or to withhold authority to vote for any individual
nominee, may do so by marking the proxy to that effect. Each director elected
will continue in office until a successor has been elected. The Board of
Directors recommends a vote "FOR" the election of the nominees listed below,
each of whom has consented to be named as a nominee and to serve if elected. If
for any reason any nominee named is not a candidate (which is not
1
<PAGE>
expected) when the election occurs, proxies will be voted for a substitute
nominee determined by the Board of Directors.
The following table sets forth certain information about the nominees, all
of whom except Mr. Haner and Ms. Hartley, are presently members of the Board,
and about the other directors whose terms of office will continue after the
Annual Meeting. The number of shares of Corporation common stock beneficially
owned, directly or indirectly, is as of January 15, 1998.
CLASS II--MANAGEMENT'S NOMINEES FOR A 3 YEAR TERM ENDING IN 2001:
<TABLE>
<CAPTION>
SHARES PERCENT OF
NAME AND PRINCIPAL OCCUPATION AGE AS OF FIRST BECAME BENEFICIALLY COMMON STOCK
FOR LAST FIVE YEARS RECORD DATE DIRECTOR (1) OWNED (2) OUTSTANDING
- --------------------------------------------------------- ----------------- --------------- ----------- -------------------
<S> <C> <C> <C> <C>
R. Bruce Haner........................................... 50 2,855(3) .06
Owner, Haner's Auto Sales and
Haner's Auto Rental
Susan E. Hartley......................................... 40 1,063 .02
Attorney at Law
Edward L. Learn.......................................... 50 1989 1,421 .03
Owner, Learn Hardware & Building
Supply, formerly Manager of
Purina Mills, Inc.
Leonard Simpson.......................................... 49 1989 16,170(4) .32
Attorney at Law, formerly Sullivan
County District Attorney
Donald E. Treat.......................................... 64 1966 11,327 .22
Self-employed, formerly
owner of Treat Hardware
</TABLE>
CLASS III--CONTINUING DIRECTORS WITH TERMS EXPIRING IN 1999:
<TABLE>
<S> <C> <C> <C> <C>
J. Robert Bower.............................. 63 1967 33,449(5) .65
Pharmacist, formerly with
Fay's Drug Co., Inc.
William K. Francis........................... 66 1971 40,547(6) .79
Chairman of the Board of
Citizens & Northern Corporation
and Citizens & Northern Bank,
Retired President and Chief
Executive Officer of Citizens &
Northern Corporation and
Citizens & Northern Bank
Karl W. Kroeck............................... 58 1996 1,527 .03
Farmer
Craig G. Litchfield.......................... 50 1996 9,286(7) .18
President & Chief Executive Officer
of Citizens & Northern Corporation
and Citizens & Northern Bank, formerly
Senior Vice President of Citizens &
Northern Corporation and Citizens &
Northern Bank
</TABLE>
2
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
Lawrence F. Mase............................. 63 1990 5,398 .11
Retired, formerly
President of Mase's, Inc.
</TABLE>
CLASS I -- CONTINUING DIRECTORS WITH TERMS EXPIRING IN 2000:
<TABLE>
<S> <C> <C> <C> <C>
R. Robert DeCamp............................. 57 1988 1,001 .02
President of Patterson Lumber
Co., Inc.
Adelbert E. Eldridge......................... 65 1989 5,330(8) .10
Retired Regional Director of
Susquehanna Region of Pennsylvania
Electric Co.
Robert J. Murphy............................. 65 1988 6,800 .13
Retired, formerly Attorney in law firm
of Davis, Murphy, Niemiec & Smith
Edward H. Owlett, III........................ 43 1994 6,265(9) .12
Attorney in law firm of
Owlett, Lewis & Ginn, P.C.
F. David Pennypacker......................... 56 1993 3,200 .06
Certified Public Accountant in firm
of Pennypacker & Zeigler, P.C.
All Directors and Executive Officers as a 174,676 3.42
Group (20 persons).........................
</TABLE>
(1) Includes service as director of the Corporation's predecessor, Citizens &
Northern Bank.
(2) Pursuant to the General Rules and Regulations of the Securities and Exchange
Commission, an individual is considered to "beneficially own" shares of
common stock if he or she directly or indirectly has or shares (a) the power
to vote or direct the voting of the shares; or (b) investment power with
respect to the shares, which includes the power to dispose of or direct the
disposition of the shares. Unless otherwise indicated in a footnote below,
each individual holds sole voting and investment authority with respect to
the shares listed. In addition, an individual is deemed to be the beneficial
owner if he or she has the right to acquire shares within 60 days through
the exercise of any option. Therefore, the following stock options which are
exercisable within 60 days after January 15, 1998 are included: Mr. Bower,
200 shares; Mr. DeCamp, 200 shares; Mr. Eldridge, 200 shares; Mr. Francis,
200 shares; Mr. Kroeck, 200 shares; Mr. Learn, 200 shares; Mr. Litchfield,
1,000 shares; Mr. Mase, 200 shares; Mr. Murphy, 200 shares; Mr. Owlett, 200
shares; Mr. Pennypacker, 200 shares; Mr. Simpson, 200 shares; and Mr. Treat,
200 shares. This information has been furnished by each individual.
(3) Mr. Haner disclaims beneficial ownership of a total of 28 shares included
above that are held for his children.
(4) Includes 1,597 shares held in a SEP-IRA Plan for the benefit of Mr.
Simpson's retirement plan.
(5) Mr. Bower disclaims beneficial ownership of 10,673 shares included above
that are held individually by his wife. Includes 1,030 shares held in an IRA
for the benefit of Mr. Bower.
(6) Mr. Francis disclaims beneficial ownership of 644 shares included above that
are held for his granddaughter. Includes 5,916 shares held in an IRA for the
benefit of Mr. Francis.
(7) Mr. Litchfield disclaims beneficial ownership of 1,152 shares held
individually by his wife and a total of 743 shares included above that are
held with his daughters.
3
<PAGE>
(8) Includes 3,120 shares held in a self-directed IRA for the benefit of Mr.
Eldridge.
(9) Mr. Owlett disclaims beneficial ownership of a total of 4,918 shares
included above that are held for his nephews and niece.
No person named above as a nominee or director has any family relationship
with any other person so named.
BOARD OF DIRECTOR COMMITTEES,
ATTENDANCE AT MEETINGS AND COMPENSATION OF DIRECTORS
Both the Corporation's and the Bank's by-laws provide that the Board may
create any number of committees of the Board as it deems necessary or
appropriate from time to time. As of the date hereof, no Board committees of the
Corporation have been established.
The Bank has an Audit Committee consisting of nine non-employee members of
the Board of Directors. The members of the Committee are Adelbert E. Eldridge,
Karl W. Kroeck, Edward L. Learn, John H. Macafee, Lawrence F. Mase, Robert J.
Murphy, Edward H. Owlett, III, F. David Pennypacker and Donald E. Treat. The
primary function of the Audit Committee is to review the internal audit program
as performed by the internal auditors, recommend to the Board of Directors the
independent auditors for the year, and review the examinations and reports from
those persons. The Audit Committee held three meetings in 1997.
The Bank has an Executive Committee consisting of eight members of the Board
of Directors who are as follows: R. Robert DeCamp, R. James Dunham, William K.
Francis, Craig G. Litchfield, John H. Macafee, Robert J. Murphy, F. David
Pennypacker and Leonard Simpson. The function of this committee is to recommend
policy procedures. During 1997, the Executive Committee held seven meetings. The
Executive Committee also functions as a nominating committee and an investment
committee.
The Compensation Committee of the Bank, which held three meetings in 1997,
consisted of the following six non-employee members of the Board of Directors:
R. Robert DeCamp, R. James Dunham, John H. Macafee, Robert J. Murphy, F. David
Pennypacker and Leonard Simpson. The committee is charged with reviewing
compensation for all officers and employees of the Bank and administering the
retirement and benefit plans.
The Trust Investment Committee of the Bank, which met eleven times in 1997,
consists of four members of the Board of Directors; namely, J. Robert Bower, R.
James Dunham, Edward L. Learn and Leonard Simpson. Thomas L. Briggs, Executive
Vice President and Senior Trust Officer of the Bank, is also a member of this
committee, which determines the policy and investments of the Trust Department,
the acceptance of all fiduciary relationships and relinquishments of all
fiduciary relationships. The committee keeps minutes of their meetings which are
reviewed monthly by the Board of Directors.
The Bank also has an Asset Liability Committee, which consisted of R. Robert
DeCamp, William K. Francis, Craig G. Litchfield, Robert J. Murphy and F. David
Pennypacker, five members of the Board of Directors, as well as James W.
Seipler, Treasurer of the Corporation. This committee met twelve times during
1997. The purpose of the committee is to stabilize and improve profitability by
balancing the relationship between risk and return over an extended period of
time.
The Board of Directors of the Corporation met twelve times and the Board of
Directors of the Bank met fourteen times in 1997. All of the directors attended
at least 75% or more of the combined number of meetings of the Corporation, Bank
and their committees of which they were members.
All directors of the Corporation are directors of the Bank. Each director
who is not an officer of the Corporation or Bank received an annual retainer of
$10,000 and an attendance fee of $100 for each meeting of the Board attended. In
addition, each such director received a fee of $100 for attendance at
4
<PAGE>
each committee meeting. The aggregate amount of directors' retainers and fees
paid during 1997 was $207,200.
CORPORATION'S AND BANK'S EXECUTIVE OFFICERS
The following table sets forth certain information with respect to the
current executive officers of the Corporation and the Bank.
<TABLE>
<CAPTION>
SHARES PERCENT OF
AGE AS OF BENEFICIALLY COMMON STOCK
NAME AND POSITION FOR LAST FIVE YEARS RECORD DATE OWNED (1) OUTSTANDING
- ----------------------------------------------------------------------- ----------------- ----------- -------------------
<S> <C> <C> <C>
Craig G. Litchfield.................................................... 50 9,286(2) .18
President and C.E.O.of the Corporation and the
Bank since January, 1997; President of the
Corporation and Bank since 1996; formerly
Senior Vice President of the Corporation and the
Bank
Robert W. Anderson..................................................... 59 7,299(3) .14
Executive Vice President of Management
Information System since April, 1997; formerly
Vice President, Data Processing, of the Bank
Thomas L. Briggs....................................................... 47 5,660(4) .11
Executive Vice President and Senior Trust
Officer since April, 1997; formerly Vice President
and Trust Officer of the Bank
Brian L. Canfield...................................................... 46 4,401(5) .09
Executive Vice President and Branch System
Administrator since April, 1997; formerly Vice
President of the Bank
Matthew P. Prosseda.................................................... 36 1,173(6) .02
Executive Vice President and Commercial Loan
Coordinator since April, 1997; formerly Vice
President of the Bank
James W. Seipler....................................................... 56 10,504(7) .21
Treasurer of the Corporation since 1987;
Executive Vice President and Treasurer of the Bank
since April, 1997; formerly
Controller and Cashier of the Bank
</TABLE>
(1) Number of shares of Corporation common stock beneficially owned, directly or
indirectly, as of January 15, 1998. Unless otherwise indicated in a footnote
below, each individual holds sole voting and investment authority with
respect to the shares listed. This information has been furnished by each
individual.
(2) Mr. Litchfield disclaims beneficial ownership of 1,152 shares held
individually by his wife and a total of 743 shares included above that are
held with his daughters. Includes 1,000 shares which may be acquired upon
the exercise of stock options within 60 days.
(3) Includes 1,020 shares which may be acquired upon the exercise of stock
options within 60 days.
(4) Mr. Briggs disclaims beneficial ownership of 445 shares held individually by
his wife and a total of 919 shares included above that are held for his
children. Includes 400 shares which may be acquired upon the exercise of
stock options within 60 days.
5
<PAGE>
(5) Mr. Canfield disclaims beneficial ownership of a total of 757 shares
included above that are held for his children. Includes 600 shares which may
be acquired upon the exercise of stock options within 60 days.
(6) Includes 480 shares which may be acquired upon the exercise of stock options
within 60 days.
(7) Mr. Seipler disclaims beneficial ownership of 574 shares included above that
are held jointly with his sons. Includes 1,020 shares which may be acquired
upon the exercise of stock options within 60 days.
None of the above executive officers has any family relationship with any
other executive officer or with any director of the Corporation.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee ("Committee") of the Board of Directors
establishes compensation policies, plans and programs which are intended to
accomplish three objectives: to attract and retain highly capable and well
qualified executives; to focus executives' efforts on increasing long-term
stockholder value; and to reward executives at levels which are competitive with
the marketplace for similar positions and commensurate with the performance of
each executive and of Citizens & Northern. Each member of the Committee is an
independent non-employee director. The Committee establishes the salaries of the
other executive officers with input from the Chief Executive Officer and all
decisions relating to the compensation of the executive officers are reviewed by
the Board of Directors.
With the lack of long-term incentive compensation plans in the past, the
Committee recognizes the need to adjust base compensation accordingly. The key
elements in Citizens & Northern's executive compensation program, all determined
by individual and corporate performance, are base salary compensation, annual
incentive compensation and equitable retirement benefits.
Annual compensation for the Chief Executive Officer is determined in
essentially the same way as for other executives, recognizing that the CEO has
overall responsibility for the performance of Citizens & Northern. The Committee
believes that the CEO compensation should be heavily influenced by the
performance of the Corporation. The Committee established the CEO's base salary
by considering the salaries of CEOs of comparably-sized banks and their
performance according to salary information compiled by both regional and
national benefit and salary surveys.
In establishing his base salary, the Committee reached the following
conclusions regarding company performance: Survey comparison of Citizens &
Northern established a survey Peer Group of 40 independent banks whose 1996
average asset size equaled C&N's, and further narrowed their Peer Group to a
Core Group of 34 banks with an ROA of 1.00% or higher. Citizens & Northern's net
income was 15% higher than the average of the Peer Group. C&N's return on assets
for 1996 was 1.53%, 11% better than the Peer Group average and 6% better than a
Core Group average of high-performing banks. Mr. Litchfield's 1997 base salary
of $205,000 is 6% below CEO's who receive the same compensation package;
however, his total compensation with bonus and incentives falls to 66% of par
behind Core Group CEOs. In 1996, the Committee established the Chief Executive
Officer's 1997 base salary at $205,000, representing a 12% increase over 1996.
The annual compensation of the Chief Executive Officer and executive
officers is reviewed annually by the Committee, except for decisions about
awards under the Incentive Award Plan. These awards are made solely by the
attainment of specific measurable performance indicators, which are return on
assets, performance to budget, deposit growth and past-due reduction. If the
target is met, awards are calculated for each participant based upon the level
of corporate performance relative to the target. C&N's Incentive Award Plan caps
the award at 25% of base compensation, while the Peer Group awarded cash bonuses
to CEOs averaging 32%.
6
<PAGE>
The Corporation approved a non-qualified Supplemental Income Plan effective
January 1, 1989. It was designed for the purpose of retaining talented
executives and to promote in these executives a strong interest in the
long-term, successful operation of the Corporation. The Plan supplements the
lower retirement benefits of executives in comparison with average total
retirement benefits paid non-executives. The Plan is an unfunded plan and is
subject to the general creditors of the Corporation.
The Corporation approved a Stock Incentive Plan effective January 1, 1996.
The Stock Incentive Plan is designed to advance the development, growth and
financial condition of the Corporation while attracting, retaining and rewarding
executives.
The Committee believes that the concepts discussed above further the
stockholders' interests since a significant part of executive compensation is
based on obtaining results for the stockholders. The Committee bases its review
on experience of its own members, on information requested from management and
information compiled by various independent compensation consultants. The
Committee believes that the program encourages responsible management of the
Corporation.
Members of the Compensation Committee,
R. Robert DeCamp, Chairman John H. Macafee F. David
Pennypacker
R. James Dunham Robert J. Murphy Leonard
Simpson
7
<PAGE>
EXECUTIVE COMPENSATION
The summary compensation table contains information with respect to annual
compensation for services in all capacities to the Corporation and Bank for the
fiscal years ending December 31, 1996, 1995 and 1994 of those persons who were,
at December 31, 1997, (i) the Chief Executive Officer and (ii) the four (4)
other most highly compensated executives to the extent such persons' total
salary and bonus exceeded $100,000:
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
-------------------------------------------------------- ----------------------------
<S> <C> <C> <C> <C> <C> <C>
AWARDS
----------------------------
<CAPTION>
(A) (B) (C) (D) (E) (F) (G)
RESTRICTED OPTIONS/
OTHER ANNUAL STOCK SARS
SALARY(L) BONUS COMPENSATION(2) AWARDS AWARDS
NAME AND PRINCIPAL POSITION YEAR ($) ($) ($) (#) (#)
- -------------------------------- --------- ----------- --------- --------------------- --------------- -----------
<S> <C> <C> <C> <C> <C> <C>
CRAIG G. LITCHFIELD............. 1997 205,000 51,250 X 0 3,500
President and CEO 1996 175,673 43,918 X 0 2,500
1995 140,000 35,000 X 0 2,500
ROBERT W. ANDERSON.............. 1997 125,000 31,250 X 0 2,000
Executive Vice President 1996 110,850 27,500 X 0 1,700
Management Information 1995 100,000 25,000 X 0 1,700
System
JAMES W. SEIPLER................ 1997 125,000 31,250 X 0 2,000
Executive Vice President 1996 110,597 27,500 X 0 1,700
and Treasurer 1995 100,000 25,000 X 0 1,700
BRIAN L. CANFIELD............... 1997 90,000 22,500 X 0 1,500
Executive Vice President and
Branch System Administrator
MATTHEW P. PROSSEDA............. 1997 90,000 22,500 X 0 1,500
Executive Vice President and
Commercial Loan Coordinator
<CAPTION>
<S> <C> <C>
PAYOUTS
--------------------------------
(A) (H) (I)
LTIP ALL OTHER
PAYOUTS COMPENSATION(3)
NAME AND PRINCIPAL POSITION ($) ($)
- -------------------------------- ------------- -----------------
<S> <C> <C>
CRAIG G. LITCHFIELD............. 0 17,670
President and CEO 0 14,468
0 13,379
ROBERT W. ANDERSON.............. 0 24,765
Executive Vice President 0 21,218
Management Information 0 18,494
System
JAMES W. SEIPLER................ 0 21,640
Executive Vice President 0 18,886
and Treasurer 0 16,716
BRIAN L. CANFIELD............... 0 10,733
Executive Vice President and
Branch System Administrator
MATTHEW P. PROSSEDA............. 0 10,659
Executive Vice President and
Commercial Loan Coordinator
</TABLE>
- ------------------------
(1) The amounts shown in this column represent annual base salary.
(2) The Bank provides automobiles and certain other benefits for certain of its
principal officers in connection with the business of the Bank. The value of
personal benefits to the officers individually is not included in the table
above because the aggregate amount of such other compensation is less than
10% of the cash compensation paid to the individual as reported above.
(3) The amount indicated includes the Bank's contribution to the Savings &
Retirement Plan (401k) and the Non-Qualified Supplemental Executive
Retirement Plan.
STOCK INCENTIVE PLAN
In 1995, the Corporation's Board of Directors adopted and the stockholders
approved the Citizens & Northern Corporation Stock Incentive Plan. On December
18, 1997 ("Grant Date"), the Board of Directors granted qualified stock options
for key officers of the Bank, the right to purchase shares of the Corporation
Common Stock at a price of $33.25. The period of the options shall be ten (10)
years, commencing from the date of the grant. Not more than twenty percent (20%)
of the shares optioned may be exercised in any one year during the term of the
option, commencing with the Grant Date. The Option shall not be exercisable
until one year from the date of the grant. Shares granted under option in 1997,
1996 and 1995 were 15,000, 11,000 and 12,100, respectively. At December 31,
1997, there were 22,600 shares reserved for future grants.
8
<PAGE>
OPTION/SAR GRANTS
The following table sets forth information concerning stock options granted
in 1997 under the Stock Incentive Plan to the Chief Executive Officer and the
four most highly compensated executives of the Corporation named in the Summary
Compensation Table:
<TABLE>
<CAPTION>
(A) (B) (C) (D) (E) (F)
<S> <C> <C> <C> <C> <C>
NUMBER OF % OF TOTAL
SECURITIES OPTIONS/ EXERCISE GRANT
UNDERLYING SARS GRANTED OR BASE DATE
OPTIONS/SARS TO EMPLOYEES PRICE EXPIRATION PRESENT
NAME GRANTED IN FISCAL YEAR ($/SHARE) DATE VALUE ($)
- ---------------------------------------------- --------------- --------------- ----------- ------------ ----------
Craig G. Litchfield........................... 3,500 23.33% $ 33.25 12/18/2007 $ 116,375
Robert W. Anderson............................ 2,000 13.33% $ 33.25 12/18/2007 $ 66,500
James W. Seipler.............................. 2,000 13.33% $ 33.25 12/18/2007 $ 66,500
Brian L. Canfield............................. 1,500 10.00% $ 33.25 12/18/2007 $ 49,875
Matthew P. Prosseda........................... 1,500 10.00% $ 33.25 12/18/2007 $ 49,875
</TABLE>
AGGREGATED STOCK OPTION EXERCISES DURING 1997
AND YEAR-END OPTION VALUES
The following table sets forth information concerning the exercise during
1997 of options granted under the Stock Incentive Plan by five of the most
highly compensated executives of the Corporation named in the Summary
Compensation Table:
<TABLE>
<CAPTION>
(D)
NUMBER OF SECURITIES (E)
(B) (C) UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
NUMBER OF VALUE OPTIONS AT IN-THE-MONEY OPTIONS ON
SHARES REALIZED DECEMBER 31, 1997 DECEMBER 31, 1997 (2)
(A) ACQUIRED ON SHARES ------------------------------ ---------------------------
NAME ON EXERCISE ACQUIRED (1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- -------------------------------------- --------------- ------------ ------------- --------------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Craig G. Litchfield................... 250 $ 3,250.00 1,000 7,000 $ 10,500.00 $ 35,375.00
Robert W. Anderson.................... 0 0 1,020 4,380 $ 11,645.00 $ 24,055.00
James W. Seipler...................... 0 0 1,020 4,380 $ 11,645.00 $ 24,055.00
Brian L. Canfield..................... 0 0 600 2,900 $ 6,850.00 $ 14,150.00
Matthew P. Prosseda................... 0 0 480 2,720 $ 5,260.00 $ 11,765.00
</TABLE>
- ------------------------
(1) Represents the difference between the market value on the date of exercise
of the shares acquired and the option price of those shares.
(2) Represents the difference between the aggregate market value at December 31,
1997 of the shares subject to the options and the aggregate option price of
those shares.
9
<PAGE>
PERFORMANCE GRAPH
Set forth below is a chart comparing the Corporation's cumulative return to
stockholders against the cumulative return of the S&P 500 Index and a Peer Group
Index of similar banking organizations selected by the Corporation for the five
year period commencing January 1, 1993 and ending December 31, 1997. The index
values are market weighted, dividend reinvestment numbers which measure the
total return for investing $100.00 five years ago. This meets SEC requirements
for showing dividend reinvestment share performance over a five year period and
measures the return to an investor for placing $100.00 into a group of bank
stocks and reinvesting any and all dividends into the purchase of more of the
same stock for which dividends were paid.
COMPARISON OF 5 YEAR CUMULATIVE RETURN
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
C&N PEER GROUP S&P 500 INDEX
<S> <C> <C> <C>
1/1/93 $100.00 $100.00 $100.00
12/31/93 142.10 140.71 110.02
12/31/94 184.87 163.81 111.51
12/31/95 192.80 177.34 153.26
12/31/96 252.51 195.23 188.36
12/31/97 343.32 280.35 251.12
</TABLE>
PERIOD ENDING
<TABLE>
<CAPTION>
1/01/93 12/31/93 12/31/94 12/31/95 12/31/96 12/31/97
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
C&N......................... $ 100.00 $ 142.10 $ 184.87 $ 192.80 $ 252.51 $ 343.32
Peer Group.................. $ 100.00 $ 140.71 $ 163.81 $ 177.34 $ 195.23 $ 280.35
S&P 500 Index............... $ 100.00 $ 110.02 $ 111.51 $ 153.26 $ 188.36 $ 251.12
</TABLE>
All ten institutions in the peer group selected by the Corporation are
headquartered in Pennsylvania, have total assets of $200 to $600 Million, market
capitalization of at least $25 Million, and are not listed on the NASDAQ
National Market System. This peer group consists of ACNB Corporation,
Gettysburg; CNB Financial Corporation, Clearfield; Drovers Bancshares
Corporation, York; First West Chester Corporation, West Chester; Franklin
Financial Service Corporation, Chambersburg; Hanover Bancorp, Inc., Hanover;
Penn Security Bank and Trust Company, Scranton; Penn Rock Financial Services
Corporation, Blue Ball; Penns Woods Bancorp, Inc., Jersey Shore; and Sterling
Financial Corporation, Lancaster. This is the same peer group that was used in
1997.
10
<PAGE>
PENSION PLAN
The Citizens & Northern Bank Pension Plan (the "Plan") is intended to
provide a defined retirement benefit to participants without regard to the
profits of the Bank. Employees are neither required nor permitted to contribute
to the Plan. Annual contributions by the Bank are determined actuarially. To
participate in the Plan, an employee must be 21 years of age and have completed
one year of service. A participant's retirement benefit, which becomes fully
vested after 5 years of service, is based on compensation and credited service
with the Bank. For purposes of determining a retirement benefit, the term
"compensation" is defined to include an employee's total remuneration received
from the Bank, including base salary, bonus and overtime. Benefits are a
percentage of the average compensation for the five consecutive years of highest
compensation preceding retirement, multiplied by the number of years of
completed service, up to 25 years. The Bank's Trust Department serves as Trustee
under the Plan.
The following table indicates, for purposes of illustration, the approximate
amounts of annual retirement income which would be payable under the terms of
the Plan, in the form of a straight life annuity, to a participant who retired
as of December 31, 1997, at age 65, under various assumptions as to compensation
and years of credited service. For any plan year beginning after December 31,
1993, the Pension Plan benefits are determined on only the first $150,000, as
indexed, in compensation as determined by the Commissioner of the Internal
Revenue Service and as prescribed by law.
PENSION PLAN TABLE
<TABLE>
<CAPTION>
YEARS OF CREDITED SERVICE
----------------------------------
AVERAGE ANNUAL COMPENSATION 15 20 25 (OR MORE)
- ---------------------------------------------------------- --------- --------- ------------
<S> <C> <C> <C>
$ 75,000.................................................. $ 14,580 $ 19,440 $ 24,301
$100,000.................................................. $ 20,393 $ 27,190 $ 33,988
$125,000.................................................. $ 26,205 $ 34,940 $ 43,676
$150,000.................................................. $ 32,018 $ 42,690 $ 53,363
$175,000.................................................. $ 34,343 $ 45,790 $ 57,238
$200,000.................................................. $ 34,343 $ 45,790 $ 57,238
$225,000.................................................. $ 34,343 $ 45,790 $ 57,238
$250,000.................................................. $ 34,343 $ 45,790 $ 57,238
</TABLE>
The credited years of service under the Plan as of December 31, 1997 for
Litchfield, Anderson, Seipler, Canfield and Prosseda were 25, 26, 32, 20 and 4
years, respectively.
In December, 1989, the Bank established a non-qualified supplemental
executive retirement plan for certain key executive employees ("Executive
Plan"). The Executive Plan provides a retirement benefit for executives who
retire after attaining age 62 and 5 years of plan service in an amount
determined annually by the Directors. The Executive Plan may be terminated by
the Board of Directors at any time. In 1997, the amounts accrued pursuant to the
Executive Plan for the accounts of the officers named in the Summary
Compensation Table set forth herein, is included as "All Other Long Term
Compensation". Future estimated benefits do not take compensation into
consideration.
SAVINGS PLAN
The Citizens & Northern Savings and Retirement Plan ("Savings Plan") is
qualified under Section 401(k) of the Internal Revenue Code. It allows a
participant to authorize the deposit into the Plan of before tax earnings of
from 1% to 15% of his compensation. Under the Tax Reform Act, the maximum amount
of elective contributions that could be made by a participant during 1997 was
Nine Thousand Five Hundred Dollars ($9,500.00), also subject to a $160,000
compensation limit. All officers and employees of Citizens & Northern Bank,
including the officers named in the Summary Compensation Table set forth herein,
are eligible to participate in the 401(k) Plan. A participant may also make
voluntary contributions
11
<PAGE>
to the Plan from after tax savings of up to 10% of his compensation. The Bank is
required to contribute a basic employer contribution equal to at least 2% of
each eligible participant's compensation; in addition, the Bank may make a
discretionary basic contribution. The total actual basic employer contribution
for 1997 was equal to 4%. In addition, the Bank makes matching contributions
equal to 100% of a participant's before tax contributions up to 3% of
compensation and equal to 50% of such contributions between 3% and 5% of
compensation. The Bank's basic employer contributions are invested in the common
stock of the Corporation. All participants' contributions and the Bank's
matching contributions, at the participants' election, are invested in a choice
of nine investment funds maintained by the Bank as Trustee. In 1997, the Bank's
contribution to the Savings Plan for the accounts of the officers named in the
Summary Compensation Table set forth herein is included as "All Other Long Term
Compensation". Substantially all officers and employees of the Bank are eligible
to participate in the Savings Plan.
INCENTIVE AWARD PLAN
The Board of Directors of the Bank has adopted an Incentive Award Plan for
certain members of the management group of the Bank in order to promote a
superior level of performance relating the Bank's financial goals. Under the
Incentive Award Plan, if predetermined performance goals are realized by the
Bank in a given fiscal year, the participants will receive awards ranging up to
a maximum of 25% of their base salaries (i.e., salary before reduction for the
Savings Plan and without regard to incentive award payments).
Under the Incentive Award Plan, immediately before the beginning of each
year the Compensation Committee of the Board of Directors of the Bank will
designate the participants in the Plan and set a minimum and maximum level of
awards for each class of participants and the individual performance and
financial goals of the Bank or appropriate unit to be achieved. The Compensation
Committee, at its discretion, may adjust award payments under the Incentive
Award Plan based on extraordinary circumstances, conflicts with long-term
financial and development objectives, or below standard individual participant
performance. All awards under the Incentive Award Plan will be paid in cash and
are paid as soon as practical after the end of a plan year.
CERTAIN TRANSACTIONS
Certain directors and officers of the Corporation and Bank and their
associates (including corporations of which such persons are officers or 10%
beneficial owners) were customers of, and had transactions with the Bank in the
ordinary course of business during the year ended December 31, 1997. Similar
transactions may be expected to take place in the future. Such transactions
included the purchase of certificates of deposit and extensions of credit in the
ordinary course of business 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 risks
of collectibility or present other unfavorable features. The Bank expects that
any other transactions with directors and officers and their associates in the
future will be conducted on the same basis.
The law firm of Owlett, Lewis & Ginn, P.C., of which Director Owlett is an
employee and in which he has an interest, acts as legal counsel for the
Corporation and the Bank.
PROPOSAL 2--RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
Parente, Randolph, Orlando, Carey & Associates has been the independent
public accounting firm appointed by the Bank since 1981, and has been selected
by the Board as the independent public accounting firm for the Corporation and
the Bank for 1998. No member of the firm or any of its associates has a
financial interest in the Corporation. Parente, Randolph, Orlando, Carey &
Associates provides, in addition to audit services, non-audit professional
services such as preparation of income tax returns, consultations, and various
other services. Non-audit services are considered to have no effect on the
12
<PAGE>
independence of accountants. A representative of Parente, Randolph, Orlando,
Carey & Associates is expected to be present at the Annual Meeting to answer
appropriate questions from stockholders and will be afforded an opportunity to
make any statement that the firm desires.
The Board of Directors recommends a vote "FOR" ratification of the
appointment of Parente, Randolph, Orlando, Carey & Associates as independent
auditors of the Corporation.
STOCKHOLDER PROPOSALS
Any proposal intended to be presented by a stockholder of the Corporation at
the Corporation's 1999 Annual Meeting must be received by the Corporation no
later than December 20, 1998 to be considered for inclusion in the Corporation's
proxy statement for such meeting. Any proposal should be addressed to the
Secretary of the Corporation, 90-92 Main Street, P.O. Box 58, Wellsboro,
Pennsylvania 16901.
OTHER MATTERS
The management of the Corporation does not intend to bring any other matters
before the Annual Meeting and is not presently informed of any other business
which others may bring before such meeting. However, if any other matters should
properly come before such meeting or any adjournment thereof, it is the
intention of the persons named in the accompanying proxy to vote on such matters
as they, in their discretion, determine.
ADDITIONAL INFORMATION
The Corporation's Annual Report for the year 1997, including financial
statements as certified by Parente, Randolph, Orlando, Carey & Associates, was
mailed with this Proxy Statement on or about March 23, 1998, to the stockholders
of record as of the close of business on March 9, 1998.
A COPY OF THE CORPORATION'S 1997 ANNUAL REPORT ON FORM 10-K FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION, INCLUDING THE FINANCIAL STATEMENTS AND
SCHEDULES THERETO, WILL BE FURNISHED FREE OF CHARGE TO STOCKHOLDERS. WRITTEN
REQUEST SHOULD BE DIRECTED TO THE TREASURER, CITIZENS & NORTHERN CORPORATION,
90-92 MAIN STREET, WELLSBORO, PA, 16901, OR BY PHONE AT 717-724-3411.
By Order of the Board of Directors,
Kathleen M. Osgood
Corporate Secretary
Dated: March 23, 1998
13
<PAGE>
CITIZENS & NORTHERN CORPORATION
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR ANNUAL MEETING OF STOCKHOLDERS TO BE HELD APRIL 21, 1998
The undersigned hereby appoints R. Robert DeCamp and Lawrence F. Mase, and
each or either of them, as the attorneys and proxies of the undersigned, with
full power of substitution in each, to vote all shares of the common stock of
Citizens & Northern Corporation which the undersigned would be entitled to vote
if personally present at the Annual Meeting of Shareholders to be held on
Tuesday, April 21, 1998 at 2:00 P.M. (local time), at the Wellsboro office,
90-92 Main Street, Wellsboro, Pennsylvania 16901, and at any adjournments
thereof, and to vote as follows:
1. ELECTION OF CLASS II DIRECTORS.
Nominees: R. Bruce Haner, Susan E. Hartley, Edward L. Learn, Leonard Simpson
and Donald E. Treat.
VOTE FOR all nominees listed above (except as marked to the contrary
below) / / VOTE WITHHELD from all nominees listed above.
------------------------------------------------------------------------------
(INSTRUCTIONS: To withhold authority to vote for any individual nominee,
write that nominee's name on the space provided above.)
2. APPROVAL OF THE APPOINTMENT OF THE FIRM OF PARENTE, RANDOLPH, ORLANDO, CAREY
& ASSOCIATES AS
INDEPENDENT AUDITORS.
/ / VOTE FOR / / VOTE AGAINST / / ABSTAIN
3. OTHER MATTERS. In their discretion, to vote with respect to any other matters
that may properly come before the Meeting or any
adjournments thereof.
(over)
<PAGE>
WHEN PROPERLY EXECUTED, THIS PROXY WILL BE VOTED AS DIRECTED HEREIN BY THE
STOCKHOLDER. UNLESS OTHERWISE INDICATED, THIS PROXY WILL BE VOTED FOR THE
ELECTION AS DIRECTORS OF THE NOMINEES LISTED IN PROPOSAL 1 AND FOR PROPOSAL 2.
PLEASE SIGN EXACTLY AS NAME APPEARS HEREON. When shares are held as joint
tenants, both should sign. When signing as attorney, executor, administrator,
trustee or guardian, please give full title as such. If a corporation, please
sign in full corporate name by president or other authorized officer. If a
partnership, please sign in partnership name by authorized person.
Dated:______________________, 1998
__________________________________
(Signature)
__________________________________
(Signature)
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED
POSTAGE-PAID ENVELOPE.
