SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
Amendment No. [ ])
[XX] 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 14a6 (e) (2))
[XX] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Sec. 240.14a-11(c) or Sec.
204.14a-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
[ ] $125 per Exchange Act Rule 0-11 (c)(1)(ii), 14a-6(i)(1),
14a-6(i)(2) or Item 22 (a)(2) of Schedule 14A
[ ] $500 per each party to the controversy pursuant to Exchange
Act Rule 14a-6(i)(3)
[ ] 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 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:
CITIZENS FINANCIAL SERVICES, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 15, 1997
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 15, 1997 at the Tioga County Fairgrounds
Youth Building, Whitneyville, Pennsylvania, 16901, for the following purposes:
1. To elect two (2) Class 3 Directors to serve for a three-year term
and until their successors are elected and qualified; and
2. To transact such other business as may properly come before the
Annual Meeting and 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
12, 1997 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, 1996 is enclosed with this Notice. Copies of the Corporation's Annual
Report for the 1995 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 19, 1997
CITIZENS FINANCIAL SERVICES, INC.
PROXY STATEMENT FOR THE ANNUAL MEETING OF
SHAREHOLDERS TO BE HELD ON APRIL 15, 1997
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 15, 1997 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 19,
1997.
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 3 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.
Voting Securities, Record Date and Quorum
At the close of business on March 12, 1997, the Corporation had outstanding
1,360,228 shares of common stock, par value $1.00 per share, the only
authorized class of stock (the "Common Stock").
Page 1
Only holders of Common Stock of record at the close of business on March 12,
1997 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 and a majority of shares must be cast at
the meeting in order to become binding upon the Corporation.
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 two 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 February 28, 1997, 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 68,548 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 February 28, 1997. Beneficial ownership may be disclaimed
as to certain of the securities.
Page 2
Beneficial Ownership by Officers, Directors and Nominees
The following table sets forth as of February 28, 1997, 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.
Name of Beneficial Amount and Nature of
Owner Beneficial Ownership (1) (2) Percent of Class
Bruce L. Adams (5) (6) 2,104 (7) .15%
Carol J. Tama (3) 34,128 2.51%
R. Lowell Coolidge (3) 68,548 (8) 5.04%
Larry J. Croft (3) 11,227 (9) .83%
Robert E. Dalton (4) 15,638 (10) 1.15%
John E. Novak (4) 1,620 (11) .12%
John M. Thomas, M.D. (3) 22,502 (12) 1.65%
William D. Van Etten (5) (6) 2,899 (13) .21%
Rudolph J. van der Hiel (4) 8,402 (14) .62%
Richard E. Wilber (3) 4,625 (15) .34%
All Nominees, Directors 173,331 12.74%
and Executive Officers
as a Group - 15 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 12, 1997. Beneficial ownership may be disclaimed as
to certain of the securities.
(2) Information furnished by the directors and the Corporation.
(3) A Class 1 Director whose term expires in 1999.
(4) A Class 2 Director whose term expires in 1998.
(5) A Class 3 Director whose term expires in 1997.
(6) A Nominee for Class 3 Director whose term expires in 2000.
(7) Mr. Adams holds 1,959 shares individually, 145 shares jointly with his
spouse.
(8) Mr. Coolidge holds 54,690 shares individually, 13,858 shares are held by
his spouse.
(9) Mr. Croft holds 6,416 shares individually, 4,551 shares jointly with his
spouse, 260 shares are held by his spouse.
(10) Mr. Dalton holds 1,215 shares individually, 14,423 shares are held by
his spouse.
(11) Mr. Novak holds 1,577 shares individually, 43 shares are held by his
spouse.
Page 3
(12) Dr. Thomas holds 22,250 shares individually, 252 shares are held by his
spouse.
(13) Mr. Van Etten holds 2,467 shares individually, 432 shares are held
jointly with his spouse.
(14) Mr. van der Hiel holds 7,677 shares individually, 11 shares are held
jointly with his spouse, 714 shares are held by his spouse.
(15) Mr. Wilber holds 3,208 shares individually, 344 shares are held jointly
with his spouse, 308 shares are held by his spouse, 765 shares are held
by his wife as custodian.
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 3 Directors elected at this Annual Meeting
will serve for a three (3) year term. The Class 2 and 1 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 two (2) 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 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 3 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.
Principal Occupation
for Past Five Years
and Position Held with the Director Since
Name Age Corporation and the Bank Corporation/Bank
CURRENT CLASS 3 DIRECTORS WHOSE TERM EXPIRES IN 1997
AND NOMINEES FOR CLASS 3 DIRECTOR WHOSE TERM EXPIRES IN 2000
Bruce L. Adams 60 President of Bru-Cel Distributing 1991
Co., Inc. (1991)
William D. Van Etten 63 Dairy Farmer 1984
(1978)
Page 4
CURRENT CLASS 2 DIRECTORS WHOSE TERM EXPIRES IN 1998
Robert E. Dalton 64 Chairman of the Board Citizens Financial 1984
Services, Inc. and First Citizens National (1957)
Bank; Real Estate and Insurance Broker
John E. Novak 60 Retired School Administrator with Southern 1984
Tioga School District; since 1993 has (1976)
supervised Student Teachers at Elmira
College
Rudolph J. van 57 Attorney-at-law with the Law Office of 1984
der Hiel Rudolph J. van der Hiel; Vicar at (1975)
St. James Episcopal Church, Mansfield
and Trinity Episcopal Church, Antrim
CURRENT CLASS 1 DIRECTORS WHOSE TERM EXPIRES IN 1999
Carol J. Tama 56 President of Monaghan Transportation 1986
Company; Vice President of Keystone (1984)
Parts Manufacturing, Inc.
R. Lowell Coolidge 56 Attorney-at-Law with the firm of 1984
Walrath and Coolidge (1984)
Richard E. Wilber 48 President of Citizens Financial 1984
Services, Inc. and First Citizens (1983)
National Bank
John M. Thomas, M.D. 63 Retired Executive Chairman of Guthrie 1990
Healthcare System; President of Chemung (1985)
Spring Water Company
Larry J. Croft 61 General Manager of Croft Ford, Inc.; 1990
Secretary of Croft Lumber Co. Inc. (1969)
THE BOARD OF DIRECTORS AND ITS COMMITTEES
During 1996, there were three (3) regular meetings of the Board of Directors
of the Corporation and twenty (20) 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 Meetings.
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.
None of the Directors are involved in any legal action in his/her individual
capacity which 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.
Page 5
SECTION 16(a) BENEFICIAL OWNERSHIP COMPLIANCE
Section 16(a) of the Securities and Exchange Act of 1934 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, 1996 through December 31, 1996, its officers, directors and 5%
shareholders were in compliance with all applicable filing requirements except
that one report, which covered one transaction, was filed late by Mr. Richard
E. Wilber, a Director of the Corporation.
EXECUTIVE COMPENSATION
Information concerning the annual compensation for services in all capacities
to the Corporation for the fiscal years ended December 31, 1996, 1995 and 1994
of those persons who were, as of December 31, 1996, (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 $100,000 is set forth below.
Summary Compensation Table
Long Term Compensation
Annual Compensation Awards Payouts
Restricted Securities
Other Annual Stock Underlying LTIP All Other
Name and Salary Bonus Compensation Award(s) Options/SARs Payouts Compensation
Prinicpal Position Year ($) (1) ($) ($) ($) (#) ($) ($) (2)
Richard E. Wilber 1996 $127,582 $8,028 None None None None $10,730
President & CEO 1995 $117,107 $6,329 $ 8,345
1994 $109,087 $6,268 $ 7,133
(1) The "Salary" column includes fees paid to Mr. Wilber as a director of
the Corporation and of the Bank totaling $8,930, $8,475, $8,395, for
years 1996, 1995, and 1994 respectively.
(2) Represents the tax deferred profit sharing contribution paid by the Bank
to the Chief Executive Officer in 1996, 1995 and 1994 respectively.
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 and as
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.
Page 6
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. Although the pension plan is integrated with Social
Security, 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 1994 and 1993. Such funding
limitations no longer applied in 1995 and 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 9,932 19,864 29,795 29,795
$80,000 13,932 27,864 41,795 41,795
$100,000 17,932 35,864 53,795 53,795
$120,000 21,932 43,864 65,795 65,795
$140,000 25,932 51,864 77,795 77,795
$160,000 27,932 55,864 83,795 83,795
$180,000 27,932 55,864 83,795 83,795
Richard E. Wilber, President and Chief Executive Officer of the Corporation,
has 15 years of credited service to the Corporation and Bank. Average salary
upon which benefits would be calculated at December 31, 1996 is $114,899.
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 1996, 1995, and 1994 were
$130,820, $86,239 and $119,63, 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 $8,028
in 1996, $6,329 in 1995 and $6,268 in 1994.
Compensation of Directors
Directors of the Corporation, except for the Chairman, receive a fee of $120
per meeting. Directors of the Bank, except for the Chairman, receive $475 per
month plus fees of $90 per meeting, for attendance at various committee
meetings. The Chairman receives a fixed annual sum of $12,012. In addition
to these fees, each director is provided a $50,000 life insurance benefit. In
the aggregate, the Board of Directors received $89,103.36 for all Board of
Directors meetings, of the Corporation, of the Bank and committee meetings
attended, in 1996. Total premiums paid, in 1996, for life insurance on behalf
of the directors was $1,781.
Page 7
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 1996. 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 1996 compensation of
$118,652 is appropriate in light of the Corporation's 1996 accomplishments (a
6% increase in net income; a 13.2% return on average equity; and a 14.5%
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 8
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, 1996.
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.]
1991 1992 1993 1994 1995 1996
Peer Group Index 100.00 111.17 155.43 184.44 210.00 258.22
Citizens Financial 100.00 127.29 151.88 205.88 220.64 254.14
Services, Inc.
S&P 500 Index 100.00 104.46 111.83 110.11 147.67 177.60
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.
Page 9
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 1996, 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
$6,570.56 and $19,273.18, respectfully, for all legal services rendered to the
Corporation and/or Bank during 1996. Also during 1996, Dalton Insurance
Agency was paid $63,717.00 in premiums for various insurance coverages for the
Corporation and the Bank. Such agency is owned and operated by an immediate
family member of Robert E. Dalton, director to the Corporation and the Bank.
Total loans outstanding from the Corporation and the Bank at December 31,
1996, 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 $2,161,450.95, 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, 1997, to the above described
group was $1,893,275.92
Principal Officers of Corporation
The following table sets forth the selected information about the Executive
Officers of the Corporation, as of March 12, 1997. 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 12, 1997
Richard E. Wilber 1984 1984 4,625 48
President
Terry B. Osborne 1984 1984 424 (2) 43
Secretary
Thomas C. Lyman 1988 1988 2 51
Treasurer
Each of the above Executive Officers has served in these capacities for the
past five years.
Page 10
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 12, 1997:
Held Employee Number of Shares Age as of
Name and Position Since Since Beneficially Owned March 12, 1997
Robert E. Dalton 1985 (1) 15,638 64
Chairman of the Board
Richard E. Wilber 1983 1981 4,625 48
President
Terry B. Osborne 1991 1975 424 43
Executive Vice President
Thomas C. Lyman 1988 1988 2 51
Assistant Vice President
Finance/Control Division
Manager
William W. Wilson 1991 1979 172 (3) 47
Vice President
Operations Division Manager
Deborah E. Scott 1991 1981 635 (4) 37
Vice President
Trust and Investment
Services Manager
Cynthia T. Pazzaglia 1985 1983 405 (5) 38
Assistant Vice President
Administration Services
Division Manager
(1) Is not an employee of First Citizens National Bank.
(2) Mr. Osborne holds 334 shares jointly with his spouse, 24 shares in his
name alone, 66 shares held by his spouse.
(3) Mr. Wilson holds 172 shares jointly with his spouse.
(4) Mrs. Scott holds 508 shares jointly with her spouse, and 127 shares as
custodian.
(5) Mrs. Pazzaglia holds 405 shares jointly with her spouse.
Page 11
ANNUAL REPORT
A copy of the Corporation's Annual Report for its fiscal year ended December
31, 1996, is enclosed with this Proxy Statement. A representative of S.R.
Snodgrass, A.C., Certified Public Accountants, of Wexford, Pennsylvania, the
independent auditors who prepared the Annual Report, 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 concerning the Annual Report presented by
shareholders at the Annual Meeting.
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 1996 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 1997 fiscal year.
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
1998, 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 Thursday, November 20, 1997, 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 or SEC Form 10-K for its fiscal year ended December 31, 1996, 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 21, 1998.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Richard E. Wilber
Richard E. Wilber
President
Page 12
CITIZENS FINANCIAL SERVICES, INC.
PROXY
ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON APRIL 15, 1997
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 15, 1997 at 12:00 p.m., prevailing time, and at any adjournment or
postponement thereof as follows:
1. ELECTION OF CLASS 3 DIRECTORS TO SERVE FOR A THREE-YEAR TERM
Bruce L. Adams and William D. Van Etten
--- For all nominees --- WITHHOLD AUTHORITY
listed above (except to vote for all
as marked to the nominees listed
contrary below) above
(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:---------------------, 1997
----------------------------------
Number of Shares Held of Record ----------------------------------
on March 12, 1997 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.