Back to GetFilings.com
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1995
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the transition period from ___________________ to _____________________
Commission file number 0-13222
CITIZENS FINANCIAL SERVICES, INC.
(Exact name of registrant as specified in its charter)
PENNSYLVANIA 23-2265045
(State of other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
15 South Main Street, Mansfield, Pennsylvania 16933
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (717)
662-2121
Securities registered pursuant to section 12 (b) of the Act:
Title of each class Name of each exchange on
which registered
NOT APPLICABLE NOT APPLICABLE
Securities registered pursuant to section 12 (g) of the Act:
Common Stock, par value $1.00 per share.
(Title of class)
Indicate by checkmark whether the registrant (1) has filed
all reports to be filed by Section 13 or 15 (d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements
for the past 90 days. Yes__X___ No_____
The total market value of the voting stock of the Registrant
held by non-affiliates (for this purpose, persons or entities
other than executive officers, directors, or 5% or more
shareholders) of the Registrant, as of March 13, 1996, is
estimated to have been approximately $30,070,000.
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 or Regulation S-K is not contained herein,
and will not be contained, to the best of registrant's knowledge,
in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this
Form 10-K. ___
The number of shares outstanding of the Registrant's Common
Stock, as of March 13, 1996, 1,347,323 shares of Common Stock,
par value $1.00.
DOCUMENTS INCORPORATED BY REFERENCE
Parts I, III and IV - Definitive Proxy Statement for the Annual
Meeting of Shareholders to be held April 16, 1996.
Parts II and IV - Annual Report to Shareholders for the Year
Ended December 31, 1995.
Citizens Financial Services, Inc.
Form 10-K
INDEX
Part I Page
Item 1-Business 1-8
Item 2-Properties 8
Item 3-Legal Proceedings 8-9
Item 4-Submission of Matters to a Vote of Security Holders 9
Part II
Item 5-Market for Registrant's Common Stock and Related
Stockholder Matters 9
Item 6-Selected Financial Data 9
Item 7-Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
Item 8-Financial Statements and Supplementary Data 9
Item 9-Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 10
Part III
Item 10-Directors and Executive Officers of the Registrant 10
Item 11-Executive Compensation 10
Item 12-Security Ownership of Certain Beneficial Owners and
Management 10
Item 13-Certain Relationships and Related Transactions 10
Part IV
Item 14-Exhibits, Financial Statement Schedules, and Reports on
Form 8-K 11-12
Signatures 13
Part I
Item 1-Business
Citizens Financial Services, Inc. (the "Company") is a
Pennsylvaniabusiness corporation, incorporated April 30, 1984 for
the purpose of forming a bank holding company. First Citizens
National Bank (the "Bank") then became a wholly-owned subsidiary
of the Company by means of a merger in which the shareholders of
the Bank became shareholders of the Company.
In 1932, First National Bank opened for business in
Mansfield, Pennsylvania. In 1970 the First National Bank in
Mansfield merged with Citizens National Bank of Blossburg,
Pennsylvania to form First Citizens National Bank. In 1971, the
Bank was expanded into Potter County through the acquisition of
the Grange National Bank which had offices in Ulysses and
Genesee, Pennsylvania.
On November 16, 1990, the Company acquired Star Savings and
Loan Association (the "Association") that was originally
organized as a Pennsylvania-chartered mutual savings and loan
association in 1899 and converted to a Pennsylvania-chartered
permanent reserve fund stock savings and loan association on
March 27, 1986.
On December 31, 1991, the Association merged with the Bank.
This transaction terminated the Association's separate operations
as a savings and loan association.
On November 28, 1995 the Company and Meridian Bank, a
wholly-owned subsidiary of Meridian Bancorp, Inc., signed a
definitive agreement whereby the Company will purchase two retail
banking offices located at Canton and Gillett, Pennsylvania. The
sale is subject to obtaining all regulatory approvals and,
therefore, the final closing of the transaction is not expected
until April 1996.
As of December 31, 1995, the Bank employed 108 full time
equivalent employees at its seven full service banking
facilities.
The Bank currently engages in the general business of
banking throughout its service area of Potter, Tioga and Bradford
counties in North Central Pennsylvania and Allegany, Steuben,
Chemung and Tioga counties in Southern New York. The Bank
maintains its central office in Mansfield, Pennsylvania and
presently operates full service banking facilities in Mansfield,
Blossburg, Ulysses, Genesee, Wellsboro, Troy and Sayre as well as
an automatic teller machine located in Soldiers and Sailors
Memorial Hospital in Wellsboro, Mansfield Wal-Mart and Mansfield
University. The Bank's lending and deposit products are offered primarily
within the vicinity of its service area.
COMPETITION
The Company faces strong competition in the communities it
serves from other commercial banks, savings banks, and savings
and loan associations, some of which are substantially larger
institutions than the Company's subsidiary. In addition,
personal and corporate trust services are offered by insurance
companies, investment counseling firms, and other business firms
and individuals. The Company also competes with credit unions,
issuers of money market funds, securities brokerage firms,
consumer finance companies, mortgage brokers and insurance
companies. These entities are strong competitors for virtually
all types of financial services.
Page 1
In recent years, the financial services industry has
experienced tremendous change to competitive barriers between
bank and non-bank institutions. The Company not only must
compete with traditional financial institutions, but also with
other business corporations that have begun to deliver competing
financial services. Competition for banking services is based on
price, nature of product, quality of service, and in the case of
certain activities, convenience of location.
REGULATION AND SUPERVISION
The operations of the Bank are subject to federal and state
statutes applicable to banks chartered under the banking laws of
the United States, to members of the Federal Reserve System and
to banks whose deposits are insured by the Federal Deposit
Insurance Corporation ("FDIC"). Bank operations are also subject
to regulations of the Comptroller of the Currency
("Comptroller").
The primary supervisory authority of the Bank is the
Comptroller, who regularly examines the Bank. The Comptroller
has the authority under the Financial Institutions Supervisory
Act to prevent a national bank from engaging in unsafe or unsound
practice while conducting its business.
The Company is subject to regulation under the Bank Holding
Company Act of 1956, as amended (the "Act"), and is registered
with the Federal Reserve. Under the Act, bank holding companies
are not permitted, with certain exceptions, to acquire direct or
indirect ownership or control of more than 5% of the voting
shares of any company which is not a bank and are prohibited from
engaging in any business other than that of banking, managing and
controlling banks or furnishing services to its subsidiary banks,
except that they may, upon application, engage in, and may own
shares of companies engaged in, certain businesses found by the
Federal Reserve to be so closely related to banking as to be a
proper incident thereto (if the Federal Reserve determines that
such acquisition will be, on balance, beneficial to the public).
The Act does not place territorial restrictions on the activities
of non-bank subsidiaries of bank holding companies. The Act
requires prior approval by the Federal Reserve of the acquisition
by the Company of more than 5% of the voting stock of any
additional bank. The Company is required by the Act to file
annual reports of its operations with the Federal Reserve Board
and any additional information that the Federal Reserve Board may
require pursuant to the Bank. The Federal Reserve Board may also
make examinations of the Company and any or all of its
subsidiaries. Further, under Section 106 of the 1970
amendments to the Act and the Federal Reserve Board's
regulations, a bank holding company and its subsidiaries are
prohibited from engaging in certain tie-in arrangements in
connection with any extension of credit or provision of credit or
provision of any property or service. The so-called
"anti-tie-in" provisions state generally that a bank may not
extend credit, lease property, sell property or furnish any
service to a customer on the condition that the customer provide
additional credit or service to the
bank, to its bank holding company or to any other subsidiary of
its bank holding company or on the condition that the customer
not obtain other credit or service from a competitor of the bank,
its bank holding company or any subsidiary of its bank holding
company.
Subsidiary banks of a bank holding company are subject to
certain restrictions imposed by the Federal Reserve Act on any
extensions of credit to the bank holding company or any of its
subsidiaries, or investments in the stock or other securities of
the bank holding company and on taking of such stock or
securities as collateral for loans to any borrower.
Page 2
PERMITTED NON-BANKING ACTIVITIES
The Federal Reserve Board permits bank holding companies to
engage in non-banking activities so closely related to banking or
managing or controlling banks as to be a proper incident thereto.
The Company presently does not engage in any such acitivies nor
does it intend to in the near future.
The Riegle-Neal Interstate Banking and Branching Efficiency
Act of 1994 is discussed in detail on page 37 of Management's
Discussion and Analysis of the 1995 Annual Report.
Neither the Company nor its subsidiary anticipates that
compliance with environmental laws and regulations will have any
material effect on capital expenditures, earnings, or on its
competitive position.
The Company is a legal entity, separate and distinct from
the Bank. All of the Company's revenues, including funds
available for payment of dividends and for operating expenses,
are provided by dividends from the subsidiary. Certain
limitations exist on the availability of the subsidiary's
undistributed net assets for the payment of dividends to its
parent without prior approval of the bank regulatory authorities
as further described in Footnote 11 of the 1995 Annual Report.
LEGISLATION AND REGULATORY CHANGES
From time to time, legislation is enacted which has the
effect of increasing the cost of doing business, limiting or
expanding permissible activities or affecting the competitive
balance between banks and other financial institutions.
Proposals to change the laws and regulations governing the
operations and taxation of banks, bank holding companies and
other financial institutions are frequently made in Congress, and
before various bank regulatory agencies. Accurate predictions are
difficult to make as to the likelihood of any major changes or
the impact such changes might have on the Company and its
subsidiary. Certain changes of potential significance to the
Company which have been enacted recently and others which are
currently under consideration by Congress or various regulatory
or professional agencies are discussed below.
Risk-Based Capital Guidelines. The Federal Reserve Board,
the FDIC and the Comptroller have issued certain risk-based
capital guidelines, which supplement existing capital
requirements and have been discussed in the Management Discussion
and Analysis section on page 35 of the 1995 Annual Report to the
shareholders.
Under the Federal Deposit Insurance Corporation Improvement
Act of 1991 ("FDICIA") enacted December 19,1991, institutions
must be classified in one of five defined categories as
illustrated below (well capitalized, adequately capitalized,
undercapitalized, significantly undercapitalized and critically
undercapitalized).
Total Tier 1 Under a
Risk- Risk- Tier I Capital
Based Based Leverage Order or
Ratio Ratio Ratio
Directive
CAPITAL CATEGORY
Well capitalized >10.0 >6.0 >5.0 No
Adequately capitalized > 8.0 >4.0 >4.0*
Undercapitalized < 8.0 <4.0 <4.0*
Significantly undercapitalized < 6.0 <3.0 <3.0
Critically undercapitalized <2.0
*3.0 for those banks having the highest available regulatory
rating.
Page 3
In the event an institution's capital deteriorates to the
undercapitalized category or below, FDICIA prescribes an
increasing amount of regulatory intervention, including: (1) the
institution by a bank of a capital restoration plan and a
guarantee of the plan by a parent institution; and (2) the
placement of a hold on increases in assets, number of branches or
lines of business. If capital has reached the significantly or
critically undercapitalized levels, further material restrictions
can be imposed, including restrictions on interest payable on
accounts, dismissal of management and (in critically
undercapitalized situations) appointment of a receiver. For well
capitalized institutions, FDICIA provides authority for
regulatory intervention where the institution is deemed to be
engaging in unsafe or unsound practices or receives a less than
satisfactory examination report rating for asset quality,
management, earnings or liquidity. All but well capitalized
institutions are prohibited from accepting brokered deposits
without prior regulatory approval.
Under FDICIA, financial institutions are subject to
increased regulatory scrutiny and must comply with certain operational,
managerial and compensation standards to be developed by Federal
Reserve Board regulations. FDICIA also requires the regulators
to issue new rules establishing certain minimum standards to
which an institution must adhere including standards requiring a
minimum ratio of classified assets to capital, minimum earnings
necessary to absorb losses and minimum ratio of market value to
book value for publicly held institutions. Additional
regulations are required to be developed relating to internal
controls, loan documentation, credit underwriting, interest rate
exposure, asset growth and excessive compensation, fees and benefits.
From time to time, various types of federal and state
legislation have been proposed that could result in additional
regulation of, and restrictions on, the business of the Bank. It
cannot be predicted whether any such legislation will be adopted
or, if adopted, how such legislation would affect the business of
the Bank. As a consequence of the extensive regulation of
commercial banking activities in the United States, the Bank's
business is particularly susceptible to being affected by federal
legislation and regulations that may increase the costs of doing
business.
EFFECT OF GOVERNMENT MONETARY POLICIES
The earnings of the Company are and will be affected by
domestic economic conditions and the monetary and fiscal policies
of the United States government and its agencies.
The monetary policies of the Federal Reserve Board have had
and will likely continue to have, an important impact on the
operating results of commercial banks through its power to
implement national monetary policy in order, among other things,
to curb inflation or combat a recession. The Federal Reserve
Board has a major effect upon the levels of bank loans,
investments and deposits through its open market operations in
United States securities and through its regulation of, among
other things, the discount rate on borrowings of member banks and
the reserve requirements against member bank deposits. It is not
possible to predict the nature and impact of future changes in
monetary and fiscal policies (also see page 37 of Management's
Discussion and Analysis of the 1995 Annual Report).
INVESTMENT PORTFOLIO
The investment portfolio is discussed in detail in Footnote
3, page 16 and pages 29 and 30 of Management's Discussion and
Analysis of the 1995 Annual Report.
Page 4
Investments which have been subject to Moody or Standard and
Poor rating changes are reviewed with the investment committee,
board of directors and an independent investment advisor.
Particular attention is given to any security whose rating falls
below "A" by either rating agency at which time the security is
evaluated and a decision is made as to the possible disposition
of the investment.
The investment policy as described above has enabled the
Company to effectively manage the portfolio for increased
profits, satisfy liquidity needs and provide adequate
asset/liability management.
LOAN PORTFOLIO
Historically loans have been originated by the Bank to
customers in North Central Pennsylvania and the Southern Tier of
New York. Loans have been originated primarily through direct
loans to our existing customer base with new customers generated
by referrals from real estate brokers, building contractors,
attorneys, accountants and existing customers. The Bank also
does a limited amount of indirect loans though new and used car
dealers in the primary lending area.
All lending is governed by a lending policy which is
developed and maintained by management and approved by the board
of directors. The Bank's lending policy regarding real estate
loans is that the maximum mortgage granted on owner occupied
residential property is 80% of the appraised value or purchase
price (whichever is lower) when secured by the first mortgage on
the property. Home equity lines of credit or second mortgage
loans are originated subject to maximum mortgage liens against
the property of 75% of the current appraised value. The maximum term
for mortgage loans is 25 years for one-to four- family
residential property and 15 years for commercial and vacation
property.
The Company has begun to sell more conforming mortgage loans
as discussed in Management's Discussion and Analysis page 28 and
29. These loans are made for various terms at competitive
interest rates.
Authorized lending limits are assigned to each of the Bank's
loan officers based on experience and performance. In addition,
all commercial loans are reviewed by the loan committee
(established by the board of directors) and loans with aggregate
loan relationships over $100,000 are reviewed and approved by the
full board of directors.
Loans which do not meet the Bank's lending policies but
which have merit may be made with U. S. Small Business
Administration or Farmer's Home Administration guarantee.
The Bank, as part of its commitment to the local
communities, makes loans to the municipalities and political
subdivisions in its area of service. These loans have been made
for local services such as education, water, sewer, solid waste,
and health services. The Bank prior to the Tax Reform Act of
1986 also was active in local business activity bonds through the
local industrial development authority although at present there
is little demand for this type of loan. Local municipal loans are
made on their individual merits and based on each municipality's
financial strength and capacity to service its debt.
It is the Bank's policy that when a borrower fails to make a
required payment on a loan, the Bank attempts to cure the
deficiency by contacting the borrower and seeking payment. A
late charge is assessed after 15 days. Notice is sent to the
borrower after a payment is 7 to 15 days past due, depending on
the type of loan. Contact by telephone or in person is made
between 15 and 59 days delinquent. Once the loan is 60 days
delinquent and cannot be cured through normal collection
procedures, the Bank will institute measures to remedy the default, including
commencement of foreclosure action, accepting from the mortgagor a voluntary
deed of security in lieu of foreclosure or repossession of
collateral in the case of consumer loans.
Page 5
If foreclosure is effected, the property is sold at public
auction in which the Bank may participate as a bidder. If the
Bank is the successful bidder the acquired asset is then included
in the Bank's "foreclosed assets held for sale" account until it
is sold. When property is acquired it is recorded at the lower
of the loan balance or market value at the date of acquisition
and any write-down resulting therefrom is charged to the
allowance for loan losses. Interest accrual, if any, ceases on
the date of acquisition and all costs incurred in maintaining the related
property from the date of acquisition forward are expended.
Management believes the Bank's lending policies have been
very successful over the past five years and plans to continue
these practices with due consideration being given any future
economic changes.
The Bank's lending policy is to make loans to individuals
with a proven credit history, and minimum of one year at their
present employment, and, for installment and credit line loans, a
monthly debt payment to gross income ratio of less than 40%.
Consumer loans are made primarily on a secured basis which
normally consists of motor vehicles and liens on real property.
Unsecured loans are made on a limited basis and in amounts
usually less than $5,000.
The Bank is an active originator of guaranteed student loans
in conjunction with the Pennsylvania Higher Education Assistance
Agency. It is the Bank's policy to sell these loans to the
Student Loan Marketing Association. The total guaranteed student
loans outstanding as of December 31, 1995 was $2,710,000.
Adjustable rate mortgages are fully indexed when originated.
The yearly cap for the one-year adjustable rate mortgage is 2.0%
on any change date and a maximum of 5.0% over the life of the
loan. The yearly cap on the five-year adjustable rate mortgage
is 3.0% on any change date and 5.0% over the life of the loan.
The Bank also has a bi-weekly mortgage payment plan available.
The Bank's commercial and agricultural loans consist of real
estate, equipment, and inventory/accounts receivable/working
capital loans. Real estate, equipment and working capital loans
are made for terms of 15, 7, and 5 years, respectively. These
loans are primarily tied to the Bank's prime rate and are
adjusted at least annually. Commercial and agricultural lending
consists of loans to sole proprietors, partnerships and closely
held corporations typically with sales of less than $2,000,000
annually. In underwriting these loans, consideration is given to
the quality of management, profitability, cash flow, secondary
sources of repayment in the form of owner's capital and
collateral and micro- and macro-economic conditions.
Other consumer loans granted by the Bank consist of single
payment, personal lines of credit, installment loans to finance
vehicles, home improvements and other personal property loans.
The Bank is not dependent for deposits nor exposed by loan
concentration to a single customer or to a single industry the
loss of any one or more of which would have a materially adverse
effect on the financial condition of the Bank.
See further discussion in the Annual Report, page 17
Footnote 4, and pages 28 and 29 of Management's Discussion and
Analysis.
RISK ELEMENTS IN LOAN PORTFOLIO
Business loans are generally placed on nonaccrual status
when principal and interest payments are past due 90 days or more
unless well-secured and in the process of collection. Loans to
individuals that are secured by first or second liens on
residential real estate are placed on nonaccrual status if past
due 90 days or more and a current appraisal indicates that the
value of the collateral is less than the loan balance. Consumer
installment loans are generally charged-off when they become 90 -
120 days delinquent and collection efforts have failed to prompt
payment and/or the security has been repossessed.
Page 6
ALLOWANCE AND PROVISION FOR POSSIBLE LOAN LOSSES
The provision for loan losses is used to increase the
allowance for possible loan losses and is influenced by the
growth and quality of loans. In each accounting period, the
allowance for possible loan losses is adjusted to the amount
deemed necessary to maintain the allowance at adequate levels.
In determining the adequacy of the allowance for possible loan
losses, management considers the financial strength of borrowers,
past loan loss experience, loan collateral, changes in volume and
composition of the loan portfolio and current and projected
economic conditions. The Company regularly monitors the
creditworthiness and financial condition of its larger borrowers.
See further discussion in the annual report, page 17, footnote 4,
and pages 34 and 35 of Management's Discussion and Analysis.
LIQUIDITY AND ASSET/LIABILITY MANAGEMENT
A requirement of management in any financial institution is
to ensure liquidity is maintained to satisfy contractual
liabilities, meet withdrawal requirements of depositors, fund
operations and provide for customers' credit needs. The adequacy
of such liquidity is measured by examining the asset and
liability components of the Company's statement of condition.
Asset liquidity is provided through receipt of loan payments and
the conversion of investments and similar assets into cash.
Liability liquidity results from the ability to attract funds from
diversified funding sources at reasonable costs. While providing
for liquidity, however, management must be aware of the need to
monitor the rate sensitivity of interest-earning assets and
interest-bearing liabilities which will provide for continued
profitability in changing interest rate environments. See
further discussion in the Annual Report page 36 of Management's
Discussion and Analysis.
The Asset/Liability Management ("ALM") Committee of the
Company is charged with managing rate sensitivity to enhance net
interest income and margin while maintaining an asset/liability
mix which balances liquidity needs and interest rate risk and is
discussed in further detail on pages 36 and 37 in the
Management's Discussion and Analysis section of the 1995 Annual
Report. The ALM Committee endeavors to control interest rate risk
through proper management of rate sensitive assets and rate
sensitive liabilities and by balancing the maturity and pricing
of the Company's loan and deposit products. Interest rate risk arises when an
interest-earning asset or interest-bearing liability matures at
different intervals or its interest rate changes during a
different time frame. The difference between assets subject to
rate change over a specific period and liabilities subject to
change over the same period is referred to as the interest rate
sensitivity gap. A gap is considered positive when the amount of
interest rate sensitive assets exceeds the amount of interest
rate sensitive liabilities. A gap is considered negative when
the amount of interest rate sensitive liabilities exceeds the
amount of interest rate sensitive assets. During a period of
rising interest rates, a negative gap would tend to adversely
affect net interest income while a positive gap would tend to
result in increased net interest income. Based on the ALM
Committee's perception as to the trend of interest rates, it may
adjust the maturities and pricing of the Company's loan and
deposit products in order to achieve or maintain a desired level
of net interest revenue. The level of interest rate risk which
the ALM Committee determines is acceptable may change
periodically in an effort to attain a consistent level of profits
while remaining within the Company's loan and investment policy
guidelines.
It is management's policy to maintain a conservative gap
interest rate sensitivity position (i.e., an interest rate
sensitivity ratio in the range of positive 1.25 to negative .75),
although certain deviations may occur at given points in time.
Management believes that such a policy provides the basis for
achieving stability in interest earnings regardless of interest
rate volatility.
Page 7
Analysis of the Consolidated Statement of Cash Flows (refer
to annual report to shareholders) indicates funds from operating
activities continues to be a stable source of funds. Even after
deducting for dividends, there are adequate funds being added to
equity capital (consistent with asset growth).
CAPITAL ADEQUACY
A description of the Company's capital adequacy is presented
on page 20, Footnote 11 and in page 35 of the Management's
Discussion and Analysis section of the 1995 Annual Report.
Item 2-Properties
The headquarters of the Company is located in Mansfield,
Pennsylvania. The building contains the central offices of the
Company and the Bank. The Bank also owns six other banking
facilities. All buildings are owned by the Bank in fee and are
free of any liens or encumbrances.
PROPERTIES Current Building
Construction Date
Main office:
15 South Main St.
Mansfield, PA 16933 1971
Branch offices:
320 Main St.
Blossburg, PA 16912 1988
502 Main St.
Ulysses, PA 16948 1977
Main St.
Genesee, PA 16923 1985
306 West Lockhart St.
Sayre, PA 18840 1989
99 Main St.
Wellsboro, PA 16901 1979
103 West Main St.
Troy, PA 16947 1988
The net book value for the above properties as of December
31, 1995 was $3,121,000. The properties are recently constructed
and, with the exception of the Mansfield office, are adequate to
meet the needs of the employees and customers. The Mansfield
office includes the corporate headquarters and is in need of
expansion which is currently being reviewed by management and the
board of directors as discussed further in Management's
Discussion and Analysis on page 37 of the 1995 Annual Report.
All of the facilities are equipped with current technological
improvements for data and word processing.
Inflation does have some impact on the Company's operating
costs, however, unlike many industrial companies, substantially
all of the Company's assets and liabilities are monetary in
nature. As a result, interest rates have a more significant
impact on the Company's performance than the general level of
inflation. Over short periods of time, interest rates may not
necessarily move in the same direction or in the same magnitude
as prices of goods and services.
Item 3-Legal Proceedings
Page 8
Management is not aware of any litigation that would have a
material adverse effect on the consolidated financial position of
the Company. There are no proceedings pending other than
ordinary, routine litigation incidental to the business of the
Company and its subsidiary. In addition, no material proceedings
are pending or are known to be threatened or contemplated against
the Company and its subsidiary by government authorities.
Item 4-Submission of Matters to a Vote of Security Holders
There were no matters submitted to a vote of security
holders.
Part II
Item 5-Market for the Registrant's Common Stock and Related
Stockholder Matters
The Company's common stock is traded by local brokerage
firms and is not listed on any stock exchange.
Market and dividend information can be found on page 24 and
40 of the Company's 1995 Annual Report to the Stockholders which
is filed as Exhibit 13 hereto and is incorporated in its entirety
by reference under this Item 5.
The Company has paid dividends since the effective date of
its formation as a bank holding company. It is the present
intention of the Company's Board of Directors to continue the
dividend payment policy; however, future dividends must
necessarily depend upon earnings, financial condition, and
appropriate legal restrictions and other factors relevant at
the time the Board of Directors of the Company considers dividend
policy. Cash available for dividend distributions to
shareholders of the Company must initially come from dividends
paid by the Bank to the Company. Therefore, the restrictions on
the Bank's dividend payments are directly applicable to the
Company.
Under the Pennsylvania Business Corporation Law of 1988,
the Company may pay dividends only if after payment the Company
would be able to pay its debts as they become due in the usual
course of its business and the total assets are greater than the
sum of its total liabilities.
As of March 13, 1996, the Company has approximately 1,410
shareholders of record.
Item 6-Selected Financial Data
The information required by this item is incorporated by
reference to page 24 of the 1995 Annual Report.
Item 7-Management's Discussion and Analysis of Financial
Condition and Results of Operations
The information required by this item is incorporated by
reference to pages 27 - 37 of the 1995 Annual Report.
Page 9
Item 8-Financial Statements and Supplementary Data
The information required by this item is incorporated by
reference to pages 11 - 22 and 25 of the 1995 Annual Report.
Financial Statements:
Consolidated Balance Sheet as of December 31, 1995 and 1994
Consolidated Statement of Income for the Years Ended
December 31, 1995, 1994 and 1993
Consolidated Statement of Changes in Stockholders' Equity
for the Years Ended December 31, 1995, 1994 and 1993
Consolidated Statement of Cash Flows for the Years
Ended December 31, 1995, 1994 and 1993
Notes to Consolidated Financial Statements
Report of Independent Certified Public Accountants
Item 9-Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure
Information appearing in the definitive Proxy Statement at
Exhibit 99 under the caption "Independent Public Accountants" to
the Annual Meeting of Security Holders to be held April 16, 1996
is incorporated herein by reference in response to this item.
Part III
Item 10-Directors and Executive Officers of the Registrant
Information appearing in the definitive Proxy Statement at
Exhibit 99 under the caption "Information as to Nominees,
Directors and Executive Officers" and "Principal Officers" to the
Annual Meeting of Security Holders to be held April 16, 1996 is
incorporated herein by reference in response to this item.
Item 11-Executive Compensation
Information appearing in the definitive Proxy Statement at
Exhibit 99 under the caption "Remuneration of Officers and
Directors" related to the Annual Meeting of Security Holders to
be held April 16, 1996 is incorporated herein by reference in
response to this item.
Item 12-Security Ownership of Certain Beneficial Owners and
Management
Information appearing in the definitive Proxy Statement at
Exhibit 99 under the caption "Principal Beneficial Owners of the
Corporation's Stock" related to the Annual Meeting of Security
Holders to be held April 16, 1996 is incorporated herein by
reference in response to this item.
Item 13-Certain Relationships and Related Transactions
Information appearing in the definitive Proxy Statement at
Exhibit 99 under the caption "Certain Transactions" related to
the Annual Meeting of Security Holders to be held April 16, 1996
is incorporated herein by reference in response to this item.
Page 10
Part IV
Item 14-Exhibits, Financial Statement Schedules and Reports on
Form 8-K Documents Filed as Part of this Report:
14(a)1-Financial Statements. The following consolidated
financial statements of Citizens Financial Services, Inc. and subsidiary
included in the 1995 Annual Report are incorporated by reference
in Item 8:
Consolidated Balance Sheet as of December 31, 1995 and 1994
Consolidated Statement of Income for the Years Ended
December 31, 1995, 1994 and 1993
Consolidated Statement of Changes in Stockholders' Equity
for the Years Ended December 31, 1995, 1994 and 1993
Consolidated Statement of Cash Flows for the Years
Ended December 31, 1995, 1994 and 1993
Notes to Consolidated Financial Statements
Report of Independent Certified Public Accountants
14(a)2-Financial Statement Schedules. The following consolidated
financial statement schedules of Citizens Financial Services,
Inc. and subsidiary are incorporated by reference in Item 8:
None
All other schedules for which provision is made in
applicable accounting regulations of the Securities and Exchange Commission
are not required under the related instructions and are
inapplicable, and therefore have been omitted.
14(a)3-Exhibits:
(3)(i) - Articles of Incorporation of the Corporation, as
amended.
(3)(ii)- By-laws of the Corporation, as amended.
(4) - Instruments Defining the Rights of Security Holders
as filed in the registration statement on Form S-14
are incorporated herein by reference thereto.
(13) - Annual Report to Stockholders for the year ended
December 31, 1995.
(16) - Letter re: change in certifying accountants -
Information appearing in the definitive Proxy
Statement at Exhibit 99 under the caption
"Independent Public Accountants" to the Annual Meeting of Security
Holders to be held April 16, 1996 is incorporated herein by
reference in response to this item.
(21) - Subsidiaries of Citizens Financial Services, Inc.
(23) - Consent of Independent Accountant
Parente, Randolph, Orlando, Carey & Associates
(27) - Financial Data Schedule
(99) - Definitive Proxy Statement, notice of meeting, and
form of proxy for the Annual Meeting to be held April
16, 1996, previously filed with the Commission and
incorporated herein by reference.
Page 11
14(b)- On December 11, 1995 a report on Form 8-K was filed by the
Registrant.
Stating that on November 28, 1995 the Company and
Meridian Bank, a wholly-owned subsidiary of Meridian
Bancorp, Inc., signed a definitive agreement whereby
the Company will purchase two retail banking offices
located at Canton and Gillett, Pennsylvania.
14(c)-The exhibits required by this Item are listed under Item
14(a) above.
14(d)-Not applicable.
Page 12
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the
Securities Exchange Act of 1934, the Registrant has duly caused this report
to be signed on its behalf by the undersigned, thereunto duly
authorized.
Citizens Financial Services, Inc.
(Registrant)
/s/ Richard E. Wilber /s/ Thomas C. Lyman
By: Richard E. Wilber By: Thomas C. Lyman
President, Chief Executive Officer Treasurer
(Principal Executive Officer) (Principal Financial &
Accounting Officer)
Date: March 19, 1996 Date: March 19, 1996
Pursuant to the requirements of the Securities Exchange Act
of 1934, this report has been signed below by the following
persons on behalf of the Registrant and in the capacities and on
the dates indicated.
Signature and Capacity Date
/s/ Richard E. Wilber March 19, 1996
Richard E. Wilber, President, Chief Executive Officer, Director
(Principal Executive Officer)
_________________________
Robert E. Dalton, Director
/s/ Carol J. Bond March 19, 1996
Carol J. Bond, Director
/s/ Lowell Coolidge March 19, 1996
Lowell Coolidge, Director
/s/ Rudolph J. van der Hiel March 19, 1996
Rudolph J. van der Hiel, Director
/s/ John Novak March 19, 1996
John Novak, Director
/s/ Bruce L. Adams March 19, 1996
Bruce L. Adams, Director
/s/ William D. Van Ettan March 19, 1996
William D. Van Ettan, Director
/s/ Larry Croft March 19, 1996
Larry Croft, Director
/s/ Robert J. Landy March 19, 1996
Robert J. Landy, Director
/s/ Thomas C. Lyman March 19, 1996
Thomas C. Lyman, Treasurer
(Principal Financial and Accounting Officer)
Page 13
LIST OF ATTACHED EXHIBITS
3 (i) Articles of Incorporation, as amended.
3 (ii) By-laws of the Corporation, as amended.
13 Annual Report to Stockholders for the year ended December 31,
1995.
21 Subsidiaries of Citizens Financial Services, Inc.
23 Consents of Independent Accountant
27 Financial Data Schedule
99 Definitive Proxy Statement, notice of meeting, and form of
proxy for the Annual Meeting to be held April 16, 1996.
Page 14