CITIZENS FINANCIAL SERVICES INC
10-Ks and 10-Qs
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
(Rule 14A-101)
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:
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☐
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Preliminary Proxy Statement
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☐
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Confidential, for Use of the Commission Only (as permitted by Rule 14(a)-6(e)(2))
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☒
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Definitive Proxy Statement
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☐
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Definitive Additional Materials
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Soliciting Material under §240.14a-12
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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 all boxes that apply):
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☒
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No fee required
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☐
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Fee paid previously with preliminary materials.
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Fee computed on table in exhibit required by Item 25(b) per Exchange Act Rules 14a-6(i)(1) and 0-11.
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CITIZENS FINANCIAL SERVICES, INC.
15 South Main Street
Mansfield, Pennsylvania 16933
570-662-2121
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 16, 2024
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders (the “Annual Meeting”) of Citizens Financial Services, Inc. (the “Company”)
will be held at First Citizens Community Bank, 11499 Route 6, Wellsboro, Pennsylvania, at 10:00 a.m., local time, on Tuesday, April 16, 2024, for
the
following purposes:
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1.
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To elect three Class 1 directors to serve for three-year terms, and until their successors are duly elected and qualified;
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2.
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To ratify the appointment of S.R. Snodgrass, P.C., Certified Public Accountants, as the independent registered public accounting firm for the
Company for the fiscal year ending December 31, 2024;
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3.
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To approve, on a non-binding advisory basis, the compensation of the Company’s named executive officers as disclosed in this proxy statement;
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4.
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To vote, on a non-binding advisory basis, regarding the frequency of the non-binding advisory vote to approve the compensation of the Company’s
named executive officers; and
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5.
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To transact such other business as may properly come before the Annual Meeting or any adjournment or postponement thereof.
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NOTE: The Board of Directors is not aware of any other business to come before the meeting.
Record holders of the Company’s common stock at the close of business on February 26, 2024 are entitled to receive notice of the Annual
Meeting and any adjournment or postponement of the meeting.
Instead of mailing a printed copy of our proxy materials,
including our 2023 Annual Report to Shareholders, to each shareholder of record, we are providing access to these materials via the Internet. This reduces the amount of paper necessary to produce these materials, as well as the costs associated
with mailing these materials to all shareholders.
Accordingly, on March 7, 2024, we began mailing the Notice of Internet Availability of Proxy Materials (the “Notice”), or our proxy
statement if you previously elected to receive a printed copy of the materials, to all shareholders of record as of February 26, 2024 and posted our proxy materials on the website referenced in the Notice (
www.proxyvote.com
). As more fully described in the Notice, all shareholders may choose to access our proxy materials on the website referred to in the Notice or may request a printed set of our proxy
materials. The Notice and website provide information regarding how you may request to receive proxy materials in printed form by mail or electronically by email on an ongoing basis.
If you previously elected to receive a printed copy of the materials, we have enclosed a copy of our 2023 Annual Report to Shareholders
with this Notice and Proxy Statement.
BY ORDER OF THE BOARD OF DIRECTORS
Randall E. Black
Chief Executive Officer and President
March 7, 2024
Mansfield, Pennsylvania
IMPORTANT: The prompt return of proxies will save the Company the expense of further requests for proxies in order to
ensure a quorum. Shareholders of record may submit a proxy by Internet or by requesting a printed copy of the proxy materials and using the enclosed proxy card. You can also vote in person during the Annual Meeting. Voting instructions are printed
on your proxy card or vote authorization.
_____________________________________________________________________________________________
PROXY STATEMENT
OF
CITIZENS FINANCIAL SERVICES, INC.
_____________________________________________________________________________________________
This Proxy Statement is
furnished in connection with the solicitation of proxies by the Board of Directors (the “Board”) of Citizens Financial Services, Inc., (the “Company”), a Pennsylvania corporation headquartered at 15 South Main Street, Mansfield, Pennsylvania 16933,
to be used at the Annual Meeting of Shareholders (the “Annual Meeting”). The Annual Meeting will be held at First Citizens Community Bank, 11499 Route 6, Wellsboro, Pennsylvania, on Tuesday, April 16, 2024 at 10:00 a.m. local time. The Proxy
Statement, of Internet Availability of Proxy Materials and the proxy card were first made available on March 7, 2024 to shareholders of record as of February 26,
2024.
GENERAL INFORMATION ABOUT VOTING
Who Can Vote at the Meeting
You are entitled to vote your shares of the Company’s common stock only if the records of the Company show that you held your shares as of
the close of business on February 26, 2024 (the “Record Date”). As of the close of business on the Record Date, a total of
4,706,994 shares of
common stock were outstanding. Each share of common stock has one vote.
Attending the Meeting
If your shares are registered directly in your name, you are the holder of record of these shares and we are sending these proxy materials
directly to you. As the holder of record, you have the right to give your proxy directly to us by voting via the Internet or by mail (if you request a printed copy of the proxy materials and use the enclosed proxy card) or to vote in person at the
meeting.
If you are the beneficial owner of the Company’s common stock held by a broker, bank or other nominee (i.e., in “street name”), you will
need proof of your ownership of such stock to be admitted to the meeting. A recent brokerage statement or letter from a bank or broker are examples of proof of ownership. If you want to vote your shares of the Company’s common stock held in street
name in person at the meeting, you must obtain a written proxy in your name from the broker, bank or other nominee who is the record holder of your shares.
Quorum and Vote Required
Quorum.
The
Annual Meeting will be held only if there is a quorum. A quorum exists if a majority of the outstanding shares of common stock entitled to vote is represented at the meeting.
Votes Required for
Proposals.
In voting for the election of directors, you may vote in favor of all nominees, withhold votes as to all nominees or withhold votes as to specific nominees. There is no cumulative voting for the election of directors.
Directors must be elected by a plurality of the votes cast at the Annual Meeting. The term “plurality” means that the three nominees for Class 1 director receiving the largest number of votes cast will be elected as Class 1 directors.
In voting for the ratification of the appointment of S.R. Snodgrass, P.C., Certified Public Accountants (“S.R. Snodgrass, P.C.”), as our
independent registered public accounting firm, or on the non-binding, advisory vote to approve the compensation of the Company’s named executive officers, you may vote in favor of the proposal, against the proposal or abstain from voting. Each of
these proposals will be decided by the affirmative vote of a majority of the votes cast at the Annual Meeting.
1
In voting on the frequency of the shareholder vote to approve the compensation of the Company’s named executive officers, you may vote for
a frequency of one year, two years or three years, or you may abstain from voting. This proposal will be determined by a plurality of the votes cast at the Annual Meeting.
How We Count Votes.
If you return valid proxy instructions, vote via the Internet, or attend the meeting in person, your shares will be counted for purposes of determining whether there is a quorum, even if you abstain from voting. Shares held by brokers and other
nominees as to which they have not received voting instructions from the beneficial owners and lack the discretionary authority to vote on a particular matter are called “broker non-votes” and will be counted for purposes of determining the existence
of a quorum.
In the election of directors, votes that are withheld and broker non-votes will have no effect on the outcome of the election.
In counting votes on the proposal to ratify the selection of the independent registered public accounting firm, abstentions will have no
effect on the outcome of this proposal.
In counting votes on the proposals to approve, on a non-binding advisory basis, the compensation of the Company’s named executive officers,
and to approve, on a non-binding advisory basis, the frequency of the shareholder vote on the compensation of the Company’s named executive officers, abstentions and broker non-votes will have no effect on the outcome of these proposals.
Voting By Proxy
The Board is making available this Proxy Statement for the purpose of requesting that you allow your shares of the Company’s common stock
to be represented at the Annual Meeting by the persons named in the proxy card. All shares of common stock represented at the Annual Meeting by properly executed and dated proxy cards will be voted according to the instructions indicated on the
proxy card or as indicated when you vote via the Internet. If you sign, date and return a proxy card without giving voting instructions, your shares will be voted as recommended by the Board.
THE BOARD UNANIMOUSLY RECOMMENDS A VOTE:
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“FOR” THE ELECTION OF THE THREE CLASS 1 DIRECTORS TO SERVE FOR THREE-YEAR TERMS, AND UNTIL THEIR SUCCESSORS ARE DULY ELECTED AND
QUALIFIED;
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“FOR” RATIFICATION OF S.R. SNODGRASS, P.C. AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM;
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“FOR” THE APPROVAL, ON A NON-BINDING ADVISORY BASIS, OF THE COMPENSATION OF THE NAMED EXECUTIVE OFFICERS; AND
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“ONE YEAR” WITH RESPECT TO THE NON-BINDING ADVISORY VOTE ON THE FREQUENCY OF THE SHAREHOLDER VOTES TO APPROVE THE COMPENSATION OF
THE NAMED EXECUTIVE OFFICERS.
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If any matter not described in this Proxy Statement is properly presented at the Annual Meeting, the persons named on the proxy card will
use their own best judgment to determine how to vote your shares. The Company does not know of any other matters to be presented at the Annual Meeting.
You may revoke your proxy at any time before the vote is taken at the meeting. To revoke your proxy, you must either advise the Secretary
of the Company in writing before your common stock has been voted at the Annual Meeting, deliver a signed later-dated proxy, vote on a later date via the Internet, or attend the meeting and vote your shares in person. Please note all votes cast via
the Internet must be cast prior to 11:59 p.m. Eastern Time on April 15, 2024. Attendance at the Annual Meeting will not in itself constitute revocation of your proxy.
2
If your common stock is held in “street name,” you will receive instructions from your broker, bank or other nominee that you must follow
in order to have your shares voted. Your broker, bank or other nominee may allow you to deliver your voting instructions via telephone or the Internet. Please see the instruction form provided by your broker, bank or other nominee that accompanies
this Proxy Statement.
CORPORATE GOVERNANCE AND BOARD MATTERS
Director Independence
The Board currently consists of twelve members, all of whom are independent under the listing standards of the Nasdaq Stock Market, except
for Mr. Black who is Chief Executive Officer and President of the Company and of First Citizens Community Bank (the “Bank”), Mr. Mickey L. Jones, who is a Senior Executive Vice President and Chief Operating Officer of the Company and of the Bank, and
David Z. Richards, Jr., who is a Senior Executive Vice President of the Bank. In determining the independence of its directors, the Board considered transactions, relationships and arrangements between the Company and its directors that are not
required to be disclosed in this Proxy Statement under the heading
“Transactions with Related Persons,”
considering the loans or lines of credit
that the Bank has directly or indirectly made to Messrs. Chappell, DePaola, Freeman, Graham, Kosa, Kunes, and Landy, and Ms. Schadler.
Board Leadership Structure and Board’s Role in Risk Oversight
The Company’s Corporate Governance Policy gives the Board of Directors the discretion to separate the offices of Chairman of the Board and
the Chief Executive Officer and President or to combine them, recognizing that facts and circumstances may make one structure more advisable at any given time. Currently, the Board of Directors has determined that the separation of the offices of
Chairman of the Board and Chief Executive Officer and President enhances Board independence and oversight. Moreover, the separation of the Chairman of the Board and Chief Executive Officer and President allows the Chief Executive Officer and
President to better focus on the responsibilities of running the Company, enhancing shareholder value and expanding and strengthening our franchise while allowing the Chairman of the Board to lead the Board in its fundamental role of providing advice
to and independent oversight of management. Consistent with this determination, R. Joseph Landy serves as Chairman of the Board of Directors while Randall E. Black serves as Chief Executive Officer and President and as Vice Chairman of the Board of
Directors.
Risk is inherent with every business, and how well a business manages risk can ultimately determine its success. We face a number of
risks, including credit risk, interest rate risk, liquidity risk, operational risk, strategic risk and reputation risk. Management is responsible for the day-to-day management of the risks the Company faces, while the Board, as a whole and through
its committees, has responsibility for the oversight of risk management. In its risk oversight role, the Board of Directors has the responsibility to satisfy itself that the risk management processes designed and implemented by management are
adequate and functioning as designed. To do this, the Chairman of the Board meets regularly with management to discuss strategy and risks facing the Company. Senior management attends Board meetings and is available to address any questions or
concerns raised by the Board on risk management and any other matters. The Chairman of the Board and independent members of the Board work together to provide strong, independent oversight of the Company’s management and affairs through its standing
committees and, when necessary, special meetings of independent directors. The Board periodically meets in executive session without management present. Topics for discussion may include the evaluation of the Chief Executive Officer and President,
management succession planning, strategic planning, and such other matters as they may deem appropriate. In 2023, the Board held four executive sessions.
Rinaldo DePaola serves as Lead Independent Director for the Company and the Bank Boards of Directors. This appointment of a Lead
Independent Director resulted from the Board’s decision to follow best corporate practices. In 2023, the independent directors of the Board held two meetings.
3
Code of Ethics
The Company and the Bank have adopted a Code of Ethics that is designed to ensure that the Company’s and Bank’s directors, executive
officers and employees meet the highest standards of ethical conduct. The Code of Ethics requires that the Company’s and Bank’s directors, executive officers and employees avoid conflicts of interest, comply with all laws and other legal
requirements, conduct business in an honest and ethical manner and otherwise act with integrity and in the Company’s and Bank’s best interest. Under the terms of the Code of Ethics, directors, executive officers and employees are required to report
any conduct that they believe in good faith to be an actual or apparent violation of the Code of Ethics. The Code of Ethics is available in the Corporate Governance section of our website (www.firstcitizensbank.com).
Committees of the Board of Directors
The following table identifies the members of our Audit and Examination, Compensation/Human Resource, and Governance and Nominating
Committees as of February 26, 2024. All members of each committee are independent in accordance with the listing standards of the Nasdaq Stock Market. Based on the number of independent directors currently serving on the Compensation/Human Resource
Committee and Governance and Nominating Committee, the Company believes that the functions of these committees are sufficiently performed by the current members. The Board’s Audit and Examination, Compensation/Human Resource, and Governance and
Nominating Committees each operate under a separate written charter that is approved by the Board of Directors. Each committee reviews and reassesses the adequacy of its charter at least annually. The charters of all three committees are available
in the Corporate Governance section of our website (www.firstcitizensbank.com).
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Director
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Audit and
Examination
Committee
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Compensation/
Human
Resource
Committee
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Governance
and
Nominating
Committee
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Robert W. Chappell
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*
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X
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Rinaldo A. DePaola
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*
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Thomas E. Freeman
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X
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X
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Roger C. Graham, Jr.
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X
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Janie M. Hilfiger
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X
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E. Gene Kosa
(1)
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*
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R. Joseph Landy
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X
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X
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Christopher W. Kunes
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X
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X
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Alletta M. Schadler
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X
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X
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Number of Meetings in 2023
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6
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6
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6
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* Denotes Chairperson
(1)
Mr. Kosa is retiring from the Board immediately prior to the Annual Meeting.
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Audit and Examination
Committee.
The Audit and Examination Committee oversees the Company's accounting and financial reporting processes. It meets periodically with the independent registered public accounting firm, management and the internal auditors to
review accounting, auditing, internal control structure and financial reporting matters. Roger Graham serves as the financial sophistication designee as defined by the rules of the Securities and Exchange Commission (the “SEC”). The Board of
Directors believes that each Audit and Examination Committee member has sufficient knowledge in financial and auditing matters to serve on the committee. The committee has the authority to engage legal counsel or other experts or consultants as it
deems appropriate to carry out its responsibilities. The report of the Audit and Examination Committee required by the rules of the SEC is included in this proxy statement. See
“Report of the Audit and Examination Committee.”
Compensation/Human
Resource Committee.
The Compensation/Human Resource Committee is appointed by
the Board to assist the Board in developing compensation philosophy, criteria, goals and policies for the Company’s executive officers that reflect the values and strategic objectives of the Company and its affiliates that align their interests
with the interests of the stockholders. The Compensation/Human Resource Committee administers the Company’s compensation plans, including the annual incentive plan, restricted stock plan and tax-qualified defined benefit plan. The
Compensation/Human Resource Committee reviews and evaluates the terms of employment and change in control agreements for our executive officers.
4
Consistent with SEC disclosure requirements, the Compensation/Human Resource Committee has assessed the Company's compensation programs and
has concluded that our compensation policies and practices do not create risks that are reasonably likely to have a material adverse effect on the Company or its affiliates. Our risk assessment process includes: (1) a review of program policies and
practices; (2) a program analysis to identify risk; and (3) determinations as to the sufficiency of risk identification, the balance of potential risk to potential reward, risk control and the support of the programs and their risks to Company
strategy. Although we review all compensation programs, we focus on the programs with variability of payout, with the ability of a participant to directly affect payout and the controls on participant action and payout.
Based on the foregoing, we believe that our compensation policies and practices do not create inappropriate or unintended significant risk
to the Company or our affiliates. We also believe that our incentive compensation arrangements provide incentives that do not encourage risk-taking beyond the organization’s ability to effectively identify and manage significant risks, are
compatible with effective internal controls and are supported by the oversight and administration of the Compensation/Human Resource Committee with regard to executive compensation programs.
During 2023, the Compensation/Human Resource Committee retained and consulted with Blanchard Consulting Group, an executive compensation
and benefits consulting firm of national scope and reputation, to advise it in connection with executive compensation decisions for 2023.
Governance and
Nominating Committee.
The Governance and Nominating Committee
takes a leadership role in shaping governance policies and practices,
including recommending to the Board of Directors the corporate governance policies and guidelines that should be adopted by the Company and monitoring compliance with these policies and guidelines. In addition, the Governance and Nominating
Committee is responsible for identifying individuals qualified to become Board members, considering the candidates recommended by shareholders for Board membership, and recommending to the Board the director nominees for election at the next Annual
Meeting of Shareholders. It manages the Board’s annual review of its performance and recommends director candidates for each committee for appointment by the Board. The procedures of the Governance and Nominating Committee required to be disclosed
by the rules of the SEC are set forth below.
In order to measure and improve director effectiveness,
a yearly self-evaluation is used by the Board to determine each member’s effectiveness and identify opportunities for improvement. The performance of individual directors is assessed against a range of criteria,
including but not limited to: performance, relevant knowledge, engagement, individual contributions, leadership and group dynamics, and community involvement. The Governance and Nominating Committee annually oversees and reports to the Board an
evaluation of the Board’s performance. The process includes:
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Director Questionnaire:
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Board members complete a detailed questionnaire which (a) provides for quantitative ratings in key areas, and (b) seeks subjective comment in each of
those areas.
When answering the questions, each Board member ranks all other peer Board members, as well as themselves.
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Frequency:
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Annually.
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Completed By:
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All members of the Board.
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Findings:
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The third-party consultant provides a written summary report based on the data analysis and feedback from the directors. The findings are made
available to the Governance Nominating Committee.
Each director is able to see their own score, and the Board median score.
If a director receives an average score of 7 or below on any question by 3 or more peer directors, representatives of the Governance Nominating
Committee will talk to the director and determine what is needed to remedy the situation. If a director’s overall average score is a 7 or below, representatives of the Governance and Nominating Committee will talk to the director and
determine what is needed to remedy the situation.
Any question that 3 or more directors score 7 or below is determined to be a board weakness and representatives of the Governance and Nominating
Committee will determine, after consultation with management and/or consultants, what education or resource is needed to improve the score.
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Presentation Recommendations:
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The final summary report is reviewed and discussed with the Governance Nominating Committee by a representative of BoardEvals, LLC. The
Governance Nominating Committee will then make a summary report to the full Board.
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Governance and Nominating Committee Procedures
Minimum
Qualifications.
The Governance and Nominating Committee has adopted a set of criteria that it considers when it selects individuals to be nominated for election to the Board of Directors. A candidate must meet the eligibility requirements
set forth in the Company’s Articles of Incorporation and Bylaws, and must meet any qualification requirements set forth in any Board or committee governing documents. In particular, to encourage directors to demonstrate confidence and support of the
Company, the Board of Directors has adopted a stock ownership requirement whereby each Company director shall beneficially own an amount of Company common stock equal to the greater of (i) three times the previous year’s cash retainer, based on the
Company’s common stock price on the previous December 31, or (ii) 1,000 unencumbered shares. In addition, to support our Board refreshment goals, our Bylaws provide no person will be eligible for election, reelection, appointment or reappointment to
the Board if such person has reached 72 years of age or older on or prior to such election, reelection, appointment or reappointment. Any director who reaches 72 years of age during their terms are entitled to serve out the remainder of that term.
The Governance and Nominating Committee considers the following criteria in selecting nominees for initial election or appointment to the
Board: financial, regulatory and business experience; familiarity with and participation in the local community; integrity, honesty and reputation; dedication to the Company and its shareholders; independence; and any other factors the Governance and
Nominating Committee deems relevant, including residence, geographies, size of the Board of Directors and regulatory disclosure obligations. In order to ensure that our
Board of Directors benefits from diverse perspectives, the Governance and Nominating Committee will seek qualified nominees from a variety of backgrounds, including candidates of age, gender and ethnic diversity. Further, when identifying
nominees to serve as directors, the Governance and Nominating Committee seeks to create a Board that is strong in its collective knowledge and has a diversity of skills and experience with respect to accounting and finance, management and leadership,
vision and strategy, business operations, business judgment, industry knowledge, agri-business experience and knowledge, current or previous SEC filing company board experience, and corporate governance.
In addition, prior to nominating an existing director for re-election to the Board of Directors, the Governance and Nominating Committee
considers and reviews an existing director’s Board and committee attendance and performance, length of Board service, experience, skills and contributions that the existing director brings to the Board, equity ownership in the Company, Board
self-evaluation, and independence.
6
Process for Identifying
and Evaluating Nominees.
The process the Governance and Nominating Committee follows when it identifies and evaluates individuals to be nominated for election to the Board of Directors is as follows:
Identification.
For purposes of
identifying nominees for the Board of Directors, the Governance and Nominating Committee relies on personal contacts of the committee and other members of the Board of Directors as well as its knowledge of members of the Bank’s local communities.
The Governance and Nominating Committee will also consider director candidates recommended by shareholders in accordance with the policy and procedures set forth above. The Governance and Nominating Committee has not previously used an independent
search firm in identifying nominees.
Evaluation.
In evaluating
potential nominees, the Governance and Nominating Committee determines whether the candidate is eligible and qualified for service on the Board of Directors by evaluating the candidate under the selection criteria set forth above. In addition, the
Governance and Nominating Committee will conduct a check of the individual’s background and interview the candidate.
Board
Diversity
. In order to ensure that our Board of Directors benefits from diverse perspectives, our Board of Directors and the Nominating and Corporate Governance Committee seek qualified nominees from a variety of backgrounds, including
candidates of age, gender and ethnic diversity.
Consideration of Recommendations by Shareholders.
It is the policy of the Governance and Nominating Committee of the Board of Directors of the
Company to consider director candidates recommended by shareholders who appear to be qualified to serve on the Company’s Board of Directors. The Governance and Nominating Committee may choose not to consider an unsolicited recommendation if no
vacancy exists on the Board and the Governance and Nominating Committee does not perceive a need to increase the size of the Board. In order to avoid the unnecessary use of the Governance and Nominating Committee’s resources, the Governance and
Nominating Committee will consider only those director candidates recommended in accordance with the procedures set forth below.
Procedures to be
Followed by Shareholders.
To submit a recommendation of a director candidate to the Governance and Nominating Committee, a shareholder should submit the following information in writing, addressed to the Secretary of the Company at the
main office of the Company:
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The name and address of the person recommended as a director candidate;
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All information relating to such person that is required to be disclosed in solicitations of proxies for election of directors pursuant to Regulation 14A under the
Securities Exchange Act of 1934, as amended (the “Exchange Act”);
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The written consent of the person being recommended as a director candidate to be named in the Proxy Statement as a nominee and to serve as a director if elected;
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As to the person making the recommendation, the name and address, as they appear on the Company’s books, of such person, and number of shares of common stock of the
Company owned by such person; provided, however, that if the person is not a registered holder of the Company’s common stock, the person should submit his or her name and address along with a current written statement from the record holder
of the shares that reflects the recommending person’s beneficial ownership of the Company’s common stock; and
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5.
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A statement disclosing whether the person making the recommendation is acting with or on behalf of any other person and, if applicable, the identity
of such person.
|
In order for a director candidate to be considered for nomination at the Company’s Annual Meeting of Shareholders, the recommendation must
be received by the Governance and Nominating Committee at least 120 calendar days prior to the date the Company’s Proxy Statement was released to shareholders in connection with the previous year’s Annual Meeting, advanced by one year.
7
Board
Refreshment
. Our Board believes that a fully engaged Board of Directors is a strategic asset of the Company, and that knowledgeable and fresh viewpoints and perspectives are important for informed decision-making. The Board also believes
that appropriate tenure can facilitate directors developing greater institutional knowledge and deeper insight into the Company's operations across a variety of economic and competitive environments.
Even before vacancies arise, the Board periodically evaluates whether it collectively has the right mix of skills,
experience, attributes and diverse viewpoints necessary for it to drive shareholder value. The results of this evaluation are used to help inform the desirable skills set for potential Board nominees and to screen director candidates.
At the same time, as part of planning for Board refreshment and director succession, the Governance and Nominating
Committee's practice has been to periodically consider potential director candidates. As a result of this ongoing review, in the last five years alone, the Board has appointed and/or nominated three new directors.
With the Board’s recommended slate of three nominees, the Board believes that it has an appropriately balanced board and will continue to
consider opportunities to strengthen the Board’s composition over time. As a group, the average tenure of the nominees for election to the Board is approximately 20
years.
Director Skills Summary
Our Board brings diverse experience and perspectives to areas critical to our business. Their collective knowledge ensures appropriate
management and risk oversight and supports our strategy of long-term sustainable shareholder value.
|
Board Skills Matrix
|
||||||||||||
|
Black
|
Chappell
|
DePaola
|
Freeman
|
Graham
|
Hilfiger
|
Jones
|
Kosa
(1)
|
Kunes
|
Landy
|
Richards
|
Schadler
|
|
|
Skills and Experience
|
||||||||||||
|
Finance and Accounting
|
X
|
X
|
X
|
X
|
||||||||
|
Independent Financial Expert
|
||||||||||||
|
CEO/Business Head
|
X
|
X
|
X
|
X
|
X
|
X
|
X
|
X
|
X
|
X
|
X
|
X
|
|
Business Skills and Knowledge
|
X
|
X
|
X
|
X
|
X
|
X
|
X
|
X
|
X
|
X
|
X
|
X
|
|
Mergers and Acquisitions
|
X
|
X
|
X
|
X
|
X
|
X
|
X
|
X
|
X
|
X
|
||
|
Human Capital Management/ Compensation
|
X
|
X
|
X
|
X
|
X
|
X
|
X
|
X
|
||||
|
Industry and Technology
|
X
|
X
|
X
|
X
|
X
|
X
|
||||||
|
Growth and Emerging Technologies
|
X
|
X
|
X
|
X
|
X
|
X
|
||||||
|
Cybersecurity
|
||||||||||||
|
Risk Management
|
X
|
X
|
X
|
X
|
||||||||
|
Ag Experience
|
X
|
X
|
X
|
X
|
X
|
X
|
||||||
|
Agri-Business Experience
|
X
|
X
|
X
|
X
|
||||||||
|
Environmental
|
X
|
|||||||||||
|
Public Company Governance
|
X
|
X
|
X
|
X
|
||||||||
|
Sales and Marketing
|
X
|
X
|
X
|
X
|
X
|
X
|
X
|
X
|
X
|
X
|
X
|
X
|
|
Government Policy and Sustainability
|
X
|
X
|
X
|
|||||||||
|
Legal, Legislative or Regulatory
|
X
|
X
|
X
|
X
|
X
|
X
|
X
|
X
|
X
|
|||
|
Tenure and Independence
|
||||||||||||
|
Years on Board
|
19
|
17
|
17
|
13
|
22
|
2
|
5
|
22
|
5
|
22
|
6
|
8
|
|
Independence
|
X
|
X
|
X
|
X
|
X
|
X
|
X
|
X
|
X
|
|||
|
(1)
|
Mr. Kosa is retiring from the Board immediately prior to the Annual Meeting.
|
8
Board Diversity Matrix
Our Board views its diversity as an important strength, as our commitment to diversity of experience, gender and ethnicity is a key
driver of the Company’s success. The following matrix illustrates the diversity of the Board as of the record date of February 26, 2024.
|
Board Diversity Matrix
|
||||||||||||
|
Black
|
Chappell
|
DePaola
|
Freeman
|
Graham
|
Hilfiger
|
Jones
|
Kosa
(1)
|
Kunes
|
Landy
|
Richards
|
Schadler
|
|
|
Demographics
|
||||||||||||
|
Age
|
57
|
57
|
68
|
64
|
68
|
65
|
63
|
77
|
59
|
69
|
63
|
88
|
|
Gender Identity
|
M
|
M
|
M
|
M
|
M
|
F
|
M
|
M
|
M
|
M
|
M
|
F
|
|
African American or Black
|
||||||||||||
|
Alaskan Native or Native American
|
||||||||||||
|
Asian
|
||||||||||||
|
Hispanic or Latinx
|
||||||||||||
|
Native Hawaiian or Pacific Islander
|
||||||||||||
|
White
|
X
|
X
|
X
|
X
|
X
|
X
|
X
|
X
|
X
|
X
|
X
|
X
|
|
Two or More Races of Ethnicities
|
||||||||||||
|
LGBTQ+
|
||||||||||||
|
Directors who are Military Veterans
|
X
|
|||||||||||
|
Directors with Disabilities:
|
3
|
|||||||||||
(1)
Mr. Kosa is retiring from the Board immediately prior to the Annual Meeting.
Environmental, Social and Governance
The Company is committed to strengthening
the communities we serve through associate volunteerism and corporate philanthropy, as well as environmental responsibility and sustainability, serving as a cornerstone of the local community, and maintaining transparency in governance.
The Company supports environmental awareness and sustainability by encouraging and empowering recycling, responsible
waste management practices and energy conservation throughout the organization. We continually evaluate opportunities to reduce energy dependence in areas such as facilities, equipment, operations, shipping and business travel. In 2021, the
Company formed an Environmental, Social and Governance Committee whose mission is to ethically and positively impact the employees, the communities we serve, and the financial institution and its stakeholders by focusing on five core initiatives:
1.
Health and Wellness.
This initiative brings our employees together
in unique ways to spotlight issues of mind, body, and spirit that in one way or another affect us all. Among some of the more popular monthly topics of awareness the committee has focused on: exercise, healthy eating, women’s health, men’s
health, and mental health.
2.
Environmental Sustainability.
The Environmental, Social and Governance Committee is focused on
climate action and environmental impact, with specific efforts on conserving resources, waste reduction and recycling, and implementing sustainability measures at our physical office locations. A TerraCycle partnership has been formed with
three specialized recycling bins for pens, batteries, and single-use coffee pouches like K-Cups.
3.
Financial
Betterment.
The goals and mission are centered on initiatives the Company and Bank
have worked on for many years, such as providing low
interest loans, grants, tax credits, and educational materials and meetings offered by financial and insurance professionals. Among its many achievements, the Bank provided $450,000 in EITC funds to 47 organizations throughout Pennsylvania in 2023.
4.
Diversity, Equity
and Inclusion.
The focus of the Environmental, Social and Governance Committee is to engage a diverse workforce by creating a culture of inclusion where similarities, differences, complexities, and constructive dialogue are valued.
9
5.
Volunteerism.
The focus is on participation in charitable organizations and activities. We will continue to partner with verified 501(c)(3) charities that help provide affordable housing, small business support, financial literacy and education, youth
activities, and many others. The intention is to create community engagement opportunities for FCCB employees that are meaningful, purposeful, and that help those in need. Some of the goals and accomplishments of this committee are to (1)
encourage employees to join non-profit and community organizations in any capacity – such as volunteer coaching, and volunteering in soup kitchens and shelters, (2) volunteering on a special day of service, (3) overseeing and setting up
quarterly group volunteer events in each region, and (4) championing the TEAM build project completed at the bank-wide Employee In-Service Day.
Since 1872, the Bank and the Company have been focused on strengthening the communities they serve. We
accomplish this through volunteerism, corporate sponsorships, non-profit board service by associates, donations of physical assets, and advancing financial literacy and education.
We promote economic development through investment in community-strengthening initiatives like affordable housing.
Throughout our footprint, we have invested $15.1 million for the creation of new affordable housing.
The Company respects, values and invites diversity in our workforce, customers, suppliers, marketplace and
community.
In December 2023, the Company expanded its market presence with the opening of its 39th office in the Williamsport region. This strategic
move not only facilitated outreach to new clientele but also reinforced connections with existing clients, leveraging the company's established footprint in the northern tier of Pennsylvania.
In June 2023, the Company successfully concluded the acquisition of Huntingdon Valley Bank, integrating five additional full-service
community offices into its branch network. The synergies resulting from this consolidation have empowered the Company to continue fostering the development of its personnel and enhancing organizational capabilities.
Achieving recognition for the 16
th
consecutive year, the Company was honored by American Banker as one of the top-performing
community banks nationwide. This accolade, positioning the Company as the third-ranking institution in Pennsylvania and 54
th
nationally, underscores its commitment to excellence in financial services.
Through a dedicated partnership with the Home4Good program, the Company has actively supported individuals who are homeless or at risk of
homelessness across Delaware and Pennsylvania. By allocating funding totaling nearly $1.4 million to 18 projects, the Company has demonstrated its dedication to addressing critical social issues in the communities it serves.
With a longstanding commitment to the agriculture sector spanning over 150 years, the Company proudly sponsored Nick’s Closet – an
initiative aimed at providing official Future Farmers of America dress attire to participants. This contribution not only supports the agricultural community but also fosters opportunities for youth engagement and development. The Company also
administered its annual Agricultural Scholarship program, designed to support senior high school students pursuing further education in agricultural-related fields.
Embracing its entry into the southeast Pennsylvania market, the Company orchestrated a series of engaging events to introduce its community
banking ethos. From captivating community takeovers to charitable endeavors during Community Giveback Month, the Company has endeavored to make a positive and lasting impact on the regions it serves.
Furthermore, the Company's induction into the American Bankers Association Nasdaq Community Bank Index (ABAQ) underscores its sustained
financial performance and solidifies its position as a respected entity within the banking sector.
10
The Company is dedicated to being a financial industry leader in corporate governance and business ethics. Our Board of Directors is
composed of Directors with diverse professional and business experience. All of our directors, other than Messrs. Black, Richards and Jones, are independent. Our directors share a commitment to fostering an effective risk environment coupled with a
strong internal audit structure. Their unwavering commitment protects our customers, shareholders and reputation. Our Code of Ethics reflects the Company’s expectation for the conduct of our directors, officers and associates. Through recurring
training and disclosures, as well as periodic communication related to specific topics, the Company maintains the highest level of ethical conduct.
Clawback Policy
The Company has in place a clawback policy to ensure that executives are not unduly enriched in the event of an
accounting restatement. If we are required to prepare an accounting restatement due to material non-compliance of the Company with any financial reporting requirement under the securities laws, including any required accounting restatement to
correct an error in previously issued financial statements that is material to the previously issued financial statements, or that would result in a material misstatement if the error were corrected in the current period or left uncorrected in the
current period, the Company shall recover the excess incentive compensation received by any covered executive during the three-years from the date it is determined an accounting restatement is required.
In the case of any accounting restatement, the Compensation/Human Resource Committee is required to:
|
•
|
review all incentive compensation paid or awarded to covered executives during the recoupment period; and
|
|
•
|
if any incentive compensation would have been lower based on the restatement, to recover the incremental portion of the
incentive compensation in excess of what should have been paid based on the restated financials from the covered executive, subject to certain limited exceptions.
|
Hedging Policy
Pursuant to the Company’s Hedging
Policy, no officer, employee or director of the Company may engage in any financial or derivative transaction or trading strategy designed to hedge or offset any decrease in the market value of the Company’s common stock.
11
Director Compensation
The following table sets forth information concerning the compensation of non-employee directors during the year ended December 31, 2023.
|
Name
|
Fees Earned or
Paid in Cash ($) (1)
|
|
Stock Awards
($) (2)
|
|
All Other
Compensation ($) (3)
|
|
Total
($)
|
Robert W. Chappell
|
|
43,157
|
|
12,376
|
|
647
|
|
56,180
|
Rinaldo A. DePaola
|
|
43,057
|
|
12,376
|
|
647
|
|
56,080
|
Thomas E. Freeman
|
|
40,432
|
|
12,376
|
|
647
|
|
53,455
|
Roger C. Graham, Jr.
|
|
43,457
|
|
12,376
|
|
647
|
|
56,480
|
Janie M. Hilfiger
|
|
40,882
|
|
12,376
|
|
621
|
|
53,879
|
E. Gene Kosa
(4)
|
|
42,607
|
|
12,376
|
|
589
|
|
55,572
|
Christopher W. Kunes
|
|
40,607
|
|
12,376
|
|
647
|
|
53,630
|
R. Joseph Landy
|
|
65,237
|
|
12,376
|
|
647
|
|
78,260
|
Alletta M. Schadler
|
|
40,882
|
|
12,376
|
|
9,148
(5)
|
|
62,406
The foregoing table reflects the following arrangements:
Fees.
During
2023, each of our directors, other than Messrs. Black, Landy, Richards, and Jones, received the following fees for service on our Board of Directors: $675 for attending a board meeting and strategic retreat or training session; $26,375 annual
retainer; $350 monthly fee for committee meeting attendance; $185 for participation in a Board conference call; and $225 for attending a regional board meeting. Additionally, committee chairpersons for the Credit Committee, the Audit and Examination
Committee, the Compensation/Human Resource Committee, and the Governance and Nominating Committee received a $2,400 annual retainer. Mr. Landy, who serves as the Company’s and the Bank’s Chairman, received a fixed annual fee of $64,337, in lieu of
all director’s fees and committee member fees in 2023. Mr. Landy also received the regional board fee of $225 per attended meeting.
Deferred Compensation
Plan.
The Company maintains the Directors Deferred Compensation Plan as a vehicle for non-employee directors to defer retainers and meeting fees. Participants are eligible for a distribution under the plan upon the earlier of death,
disability, or separation from service as a non-employee director of the Company. At the election of each participant, distributions are made in either a lump sum or in a series of five annual installments. In addition, the plan provides for
distributions in the event of an unforeseeable emergency as such term is defined under Section 409A of the Internal Revenue Code. Messrs. Kosa, Landy and Chappell are currently participating in the plan.
Life Insurance.
In
addition to these fees, each active director is provided a $100,000 life insurance benefit. At age 70, the life insurance benefit for active directors is decreased by 35% to $65,000. Retired directors have a life insurance benefit of $50,000, and
at age 70 this benefit decreases by 35% to $32,500. Once a director retires, insurance coverage continues but the benefit declines as the age of the retired director increases. Total premiums paid in 2023 for life insurance on behalf of the current
and retired directors was $1,533.
12
Stock Awards.
Non-employee directors received fully vested grants of stock under our 2016 Equity Incentive Plan.
Meetings of the Board of Directors
The Board of Directors oversees all of the Company’s business, property and affairs. The Chairman of the Board and the executive officers
keep the members of the Board informed of the Company’s business through discussions at Board meetings and by providing them reports and other materials. During 2023, the Company’s Board of Directors held fourteen regular meetings.
Each of the directors attended 93% of the total number of meetings of the Board and the total number of meetings held by all committees of the Board
on which he/she served.
Meetings of the Regional Board
The Board of Directors utilizes regional boards in communities currently served by the Bank. The regional boards are composed of
well-respected people from the community, the regional executive, and regional or division presidents, and a member of the Board of Directors (who serves as a non-voting member of the regional board). The Board member serves as a communication link
to share, with the regional board, the appropriate information occurring at Board of Directors’ meetings, as well as communicating to the Board of Directors regional board issues and suggestions. Regional boards meet every other month. A fee of
$225 is paid for attendance at the regional board meetings.
Attendance at the Annual Meeting
The Company expects its directors to attend annual meetings of shareholders.
All 12 directors then serving attended the 2023 Annual Meeting of Shareholders.
Director Education
On January 22, 2024, the Board attended a commercial real estate presentation by the Federal Reserve Bank. On December 19, 2023, the Board
received net interest margin training. On November 21, 2023, the Board received training on current expected credit losses (CECL) methodology. On February 21, 2023, the Board participated in a rules and responsibilities session by Ardmore Banking
Advisors, Inc. In addition, periodic training sessions for the Board occur during regularly scheduled board and committee meetings. Topics covered during these trainings in 2023 included shareholder migration, information technology, information
security, cyber security, ransomware, Community Reinvestment Act lending, fair lending, digital banking, Bank Secrecy Act, anti-money laundering, Office of Foreign Assets
Control, Nasdaq, agricultural/agribusiness updates, regional economic updates, and third-party reports from educational sources like: Abrigo, SP Capital, Moody’s Analytics, JLL Work Dynamics Research, Experian, and Axios.
Additionally, Mr. Landy attended the PA Bankers Association convention in 2023, where he attended various banking educational sessions.
13
AUDIT-RELATED MATTERS
Report of the Audit and Examination Committee
The Audit and Examination Committee met with management periodically during the year to consider the adequacy of the Company’s internal
controls and the objectivity of its financial reporting. The Audit and Examination Committee discussed these matters with the Company’s independent registered public accounting firm and with appropriate Company financial personnel and internal
auditors. The Audit and Examination Committee also discussed with the Company’s senior management and independent registered public accounting firm the process used for certifications by the Company’s Chief Executive Officer and Chief Financial
Officer which are required for certain Company filings with the SEC.
The Audit and Examination Committee meets with the independent registered public accounting firm, the internal auditors, the Chief
Financial Officer, the Chief Operating Officer, and the Risk/Compliance Officer on a number of occasions, each of whom has unrestricted access to the Audit and Examination Committee.
Management has primary responsibility for the Company’s financial statements and the overall reporting process, including the Company’s
system of internal controls.
The independent registered public accounting firm audited the annual financial statements prepared by management, expressed an opinion as
to whether those financial statements fairly present the financial position, results of operations and cash flows of the Company in conformity with U.S. generally accepted accounting principles and discussed with the Audit and Examination Committee
any issues the independent registered public accounting firm believed should be raised with the Audit and Examination Committee.
The Audit and Examination Committee reviewed with management and S.R. Snodgrass, P.C. the Company’s audited financial statements, as well
as the audit of management’s assessment of internal control over financial reporting and met separately with both management and S.R. Snodgrass, P.C. to discuss and review those financial statements and reports prior to issuance. Management has
represented, and S.R. Snodgrass, P.C. has confirmed, to the Audit and Examination Committee, that the financial statements were prepared in accordance with U.S. generally accepted accounting principles.
The Audit and Examination Committee has received the written disclosures and the letter from S.R. Snodgrass, P.C. required by applicable
requirements of the Public Company Accounting Oversight Board regarding S.R. Snodgrass, P.C.’s communications with the Audit and Examination Committee concerning independence, and has discussed with S.R. Snodgrass, P.C. its independence. The Audit
and Examination Committee also discussed with S.R. Snodgrass, P.C. matters required to be discussed by the Public Company Accounting Oversight Board Auditing Standard No. 1301. The Audit and Examination Committee implemented a procedure to monitor
auditor independence, reviewed audit and non-audit services performed by S.R. Snodgrass, P.C., and discussed with the auditors their independence.
In reliance on these reviews and discussions referred to above, the Audit and Examination Committee recommended to the Board of Directors
that the Company’s audited financial statements be included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023, for filing with the SEC. The Audit and Examination Committee and the Board have also recommended the
selection of S.R. Snodgrass, P.C. as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2024.
The Audit and Examination Committee
of Citizens Financial Services, Inc. and First Citizens Community Bank
E. Gene Kosa (Chairman)
Thomas E. Freeman
Roger C. Graham, Jr.
Janie M. Hilfiger
Alletta M. Schadler
14
Audit Fees
The following table sets forth the fees billed to the Company for the fiscal years ended December 31, 2023 and 2022, respectively, by S.R.
Snodgrass, P.C.:
The Audit and Examination Committee is responsible for appointing and overseeing the work of the independent auditing firm. In accordance
with its charter, the Audit and Examination Committee approves, in advance, all audit and permissible non-audit services to be performed by the independent auditing firm. Such approval process ensures that the external auditor does not provide any
non-audit services to the Company that are prohibited by law or regulation.
In addition, the Audit and Examination Committee has established a policy regarding pre-approval of audit and permissible non-audit
services provided by the independent auditing firm. Management’s requests that particular services by the independent auditing firm be pre-approved under the auditor services policy must be specific as to the particular services to be provided.
The request may be made with respect to either specific services or a type of service for predictable or recurring services.
During the year ended December 31, 2023, all audit and non-audit services were approved, in advance, by the Audit and Examination Committee
in compliance with these procedures.
15
STOCK OWNERSHIP
Stock Ownership of Management and Directors
The following table sets forth the information concerning the number of shares of Company common stock beneficially owned, as of February
26, 2024, by each director continuing in office, by each nominee for director, by each named executive officer in the compensation table set forth later in this proxy statement, and by all directors and executive officers as a group. A person may be
considered to beneficially own any shares of common stock over which he or she has, directly or indirectly, sole or shared voting or investment power. Unless otherwise indicated, none of the shares listed are pledged as security, and each of the
named individuals has sole voting power and sole investment power with respect to the number of shares shown.
* Less than 1%.
16
Stock Ownership of 5% Shareholders
The following table presents common stock ownership information for persons known to us to beneficially own more than 5% of the
Company’s stock as of the record date of February 26, 2024.
ITEMS TO BE VOTED ON BY SHAREHOLDERS
Item 1
Election of Directors
The Company’s Board of Directors consists of twelve
members.
The Board is divided into three classes with three-year staggered terms, known as Class 1, Class 2 and Class 3. The
Class 1
directors to be elected at this Annual Meeting will serve for three-year terms. The remaining Class 2 and Class 3 directors will continue
to serve for one and two years, respectively, in order to complete their three-year terms.
The Board of Directors fixed the number of directors in Class 1 at three and has nominated Robert W. Chappell, Roger C. Graham, Jr., and R.
Joseph Landy for election as Class 1 directors to hold office for three-year terms to expire at the 2027 Annual Meeting of Shareholders or until their successors are duly elected and qualified. All Board nominees are currently directors of the
Company and the Bank.
Director Gene Kosa, whose term expires in 2024, will retire at the 2024 Annual Meeting and therefore will not be standing for election.
Unless you indicate on your proxy card or via the Internet that your shares should not be voted for certain nominees, the Board of
Directors intends that the proxies solicited by it will be voted for the election of all of the Board’s nominees. If any nominee is unable to serve, the persons named on the proxy card would vote your shares to approve the election of any substitute
nominee proposed by the Board of Directors. At this time, the Board of Directors knows of no reason why any nominees might be unable to serve.
The Board of Directors unanimously recommends that you vote “FOR” the election of the Board’s
nominees.
Information regarding the Board of Directors’ nominees and the directors continuing in office is provided below. Ages are as of February
26, 2024. Based on their respective experiences, qualifications, attributes and skills set forth below, the Board of Directors determined that each current director should serve as a director.
17
Nominees for Election as Class 1 Directors – Terms to Expire in 2027
Robert W. Chappell
is an
attorney-at-law. He operates the Law Office of Robert W. Chappell, Esq. located in Rome, Pennsylvania. Previously, Mr. Chappell was a partner with the Law Offices of van der Hiel, Chappell and Loomis. Mr. Chappell’s 29 years expertise as a
partner in a law firm and his involvement in business and civic organizations in the communities in which the Bank serves provide the Board valuable insight. Mr. Chappell’s years of providing legal counsel and operating a law office position him
well to continue to serve as a director for the Company. Mr. Chappell is Chairman of the Compensation/Human Resource Committee. Age 57. Director of the Company and the Bank since 2006.
Roger C. Graham, Jr.
is retired
from Graham Construction and Excavating. Mr. Graham
owned and operated Graham Construction Excavating for 20 years. As a retired,
successful business owner, Mr. Graham has a knowledgeable skill set that positions him well to continue to serve as a director for the Company. Mr. Graham is Chairman of the Credit Committee. Age 68. Director of the Company and the Bank since
2001.
R. Joseph Landy
is an
attorney-at-law with the firm of Landy Rossettie, PLLC, formerly Landy Landy Attorneys at Law, located in Sayre, Pennsylvania. Mr. Landy’s
45
years expertise as a partner in a law firm and his involvement in business and civic organizations in the communities in which the Bank serves provide the Board valuable insight. Mr. Landy’s years of providing legal counsel and operating a law
office position him well to continue to serve as a director for the Company. Mr. Landy is Chairman of the Board of Directors. Age 69. Director of the Company and the Bank since 2001.
Continuing Class 2 Directors – Terms to Expire in 2025
Thomas E. Freeman
is a retired regional manager with Blue Ridge Communications in Mansfield, Pennsylvania. Mr. Freeman worked in business for 43 years. His business expertise and involvement in numerous civic and philanthropic organizations provide valuable insight
to the Board and position him well to serve as a director for the Company. Age 63. Director of the Company and the Bank since 2010.
Christopher W. Kunes
is president/owner of Christopher Kunes General Contracting, a construction business located in State College, Pennsylvania. Mr. Kunes
has
successfully managed this construction business for 36 years. Mr. Kunes also has business interest in agriculture, masonry, restaurant, real estate development and management, along with other markets. His broad experience makes him an asset as a
director for the Company. Age 59. Director of the Company and Bank since December 2018.
David Z. Richards, Jr.
has served as
an Executive Vice President of the Bank since 2017. In 2023 he was named Senior Executive Vice President of the Bank. Prior to 2017, Mr. Richards was an Executive Vice President for ST Bancorp, Inc. from 2014-2017, and was Chief Executive
Officer/Executive Vice President of Nittany Bank/National Penn Bank from 1997 to 2014. Mr. Richards has extensive knowledge and experience in the banking industry, providing valuable insight in the daily and strategic operation of the Bank,
positioning him well to be an employee director. Age 63. Director of the Company and the Bank since December 2017.
Alletta M. Schadler
is co-owner and manager of the Farmer’s Pride Airport, a privately owned, public-use airport in Fredericksburg, Pennsylvania, and a retired home economist, family living agent and director from Penn State Extension in Lebanon County, Pennsylvania.
Ms. Schadler worked for Penn State Extension for 30 years and has been co-owner of the airport since 1990. She is a former director of The First National Bank of Fredericksburg. Her business expertise and involvement in civic and philanthropic
organizations provide valuable insight to the Board and position her well to serve as a director for the Company. Age 88. Director of the Company and the Bank since 2015.
18
Continuing Class 3 Directors – Terms to Expire in 2026
Randall E. Black
has served as the
Chief Executive Officer and President of the Company and the Bank since 2004, and prior to 2004 was the Chief Financial Officer of the Bank. Mr. Black was named Vice Chairman of the Board of Directors in December 2021. Mr. Black’s
31 years of extensive experience in the banking industry and involvement in business and civic organizations in the communities in which the Bank
serves afford the Board valuable insight regarding the business and operation of the Bank. Mr. Black’s knowledge of the Company’s and Bank’s business and history, combined with his success and strategic vision, position him well to continue to serve
as our Chief Executive Officer and President. Mr. Black is President of 1
st
Realty of PA, LLC, a subsidiary of the Bank. Additionally, Mr. Black is a Class A
Federal Reserve Bank Director, Deputy Chair of the Federal Reserve Bank Audit Committee, a Pennsylvania State University Board of Trustees member, Chair of the Pennsylvania State University Audit and Risk Committee, the First Vice Chair of the
Pennsylvania Bankers Association Board of Directors, is a Bloomsburg University Zeigler College of Business Executive Advisory Board member, and is a Pennsylvania College of Technology Board member.
Age 57. Director of the Company and the Bank since 2004.
Rinaldo A. DePaola
is a retired
partner of the law firm of Griffin, Dawsey, DePaola Jones located in Towanda, Pennsylvania. Mr. DePaola was an attorney-at-law for 39 years, retiring in 2021, specializing in business, probate and trust matters. Mr. DePaola’s involvement in
business and civic organizations in the communities in which the Bank serves provide the Board valuable insight. Mr. DePaola’s years of providing legal counsel and operating a law office position him well to continue to serve as a director for the
Company. Mr. DePaola is Chairman of the Governance and Nominating Committee. Age 68. Director of the Company and the Bank since 2006.
Janie M. Hilfiger
is president of
UPMC Susquehanna Soldiers Sailors Memorial Hospital in Wellsboro, Pennsylvania and Cole Memorial, now UPMC, in Coudersport, Pennsylvania. Mrs. Hilfiger has over 42 years of health care expertise in strategic planning, clinical operations,
nursing and patient care excellence. Her broad experience and valuable insight make her an asset as a director for the Company. She is also involved in business and civic organizations in the communities in which the Bank serves. Age 65.
Director of the Company and the Bank since 2022.
Mickey L. Jones
has served as an
Executive Vice President and the Chief Operating Officer of the Company and the Bank since April 2010, and served as Chief Financial Officer from April 2010 to November 2019. In 2023 Mr. Jones was named Senior Executive Vice President and Chief
Operating Officer for the Company and the Bank. Mr. Jones has strong accounting and financial skills, is a certified public accountant, and has experience with operational risk management, strategic planning and corporate governance matters. Age
63. Treasurer of the Company and the Bank since 2004. Director of the Company and the Bank since 2020 and 2018, respectively.
Executive Officers Who Are Not Directors
Set forth below is information regarding the Company’s and the Bank’s executive offers who do not serve as directors of the Company.
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Executive officers are
elected annually by, and serve at the discretion of, the Board.
Item 2
Ratification of Independent Registered Public Accounting Firm
The Audit and Examination Committee of the Board is responsible for selecting the Company’s independent public accounting firm. At its
meeting held on December 19, 2023, the Audit and Examination Committee, appointed S.R. Snodgrass, P.C. as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2024. Although shareholder approval of this
appointment is not required, the Board is submitting the selection of S.R. Snodgrass, P.C. for ratification to obtain the views of shareholders. A representative of S.R. Snodgrass, P.C. will be present at the Annual Meeting to respond to appropriate
questions from shareholders and will have the opportunity to make a statement should he or she desire to do so.
If ratification of the appointment of S.R. Snodgrass, P.C. is not approved by a majority of the votes cast by shareholders at the Annual
Meeting, other independent registered public accounting firms will be considered by the Audit and Examination Committee of the Board of Directors.
The Board unanimously recommends that you vote “FOR” ratification of the appointment of S.R. Snodgrass, P.C. as the
Company’s independent registered public accounting firm for fiscal year 2024.
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Item 3
Advisory Vote on Executive Compensation
The Board is committed to excellence in governance. As part of that commitment, and as required by federal securities laws, the Board is
providing the Company’s shareholders with an opportunity to approve, on a non-binding advisory, the compensation of our named executive officers as disclosed in this Proxy Statement in accordance with the compensation disclosure rules of the
Securities and Exchange Commission, including the “Compensation Discussion and Analysis,” the compensation tables and the related narrative discussion contained in this Proxy Statement.
This proposal, commonly known as a “say-on-pay” proposal, gives the Company’s shareholders the opportunity to endorse or not endorse the
Company’s executive compensation program and policies through the following resolution:
“Resolved, that the compensation of the named executive officers, as described in the tabular disclosure regarding named executive officer
compensation and the accompanying narrative disclosure in this proxy statement, is hereby approved.”
Because the vote is advisory, it will not be binding upon the Company or the Board. However, the Compensation/Human Resource Committee
will review and consider the outcome of the vote when making future executive compensation arrangements.
The Board unanimously recommends a vote “FOR” approval of the compensation of the named executive officers.
Item 4
Advisory Vote on the Frequency of the Shareholder Vote on Executive Compensation
As part of the Board’s commitment to excellence in corporate governance, and as required by federal securities laws to occur at least every
six years, the Board is providing the Company’s stockholders with an opportunity to provide a non-binding advisory vote on the frequency of the advisory vote on the compensation of the Company’s named executive officers. The last frequency vote was
held at the 2018 Annual Meeting of Shareholders at which shareholders voted to hold the advisory vote on the compensation of the Company’s named executive officers every three years. The proposal gives the Company’s shareholders the opportunity to
recommend whether the frequency of a shareholder vote on the compensation of the named executive officers will be every one, two, or three years. Shareholders may also abstain from voting on the frequency of a shareholder vote on executive
compensation.
Because the vote is advisory, it will not be binding upon the Company or the Board. However, the Compensation/Human Resource Committee
will review and consider the outcome of the vote when determining and recommending to the Board the frequency of a shareholder vote on executive compensation. The Board
values constructive dialogue on executive compensation and other important governance topics with our shareholders. The Board believes an advisory vote every year will provide an effective way to obtain information on shareholder sentiment about
our executive compensation program by allowing adequate time for the Corporation to respond to shareholders’ feedback and engage with shareholders to understand and respond to the vote results.
This vote is advisory in nature and therefore will not bind us to adopt any particular frequency. However, the Board
intends to carefully consider the shareholder vote resulting from the proposal in determining how frequently we will hold “say-on-pay” votes.
The Board of Directors unanimously recommends that shareholders vote “ONE YEAR” with respect to the non-binding advisory
vote on the frequency of the shareholder vote to approve the compensation of the named executive officers.
Note
: Shareholders are not voting to approve or
disapprove this recommendation.
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Compensation/Human Resource Committee Report
The Compensation/Human Resource Committee has reviewed the Compensation Discussion and Analysis that is provided by the rules established
by the Securities and Exchange Commission. Based on such review and discussion, the Compensation/Human Resource Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this proxy statement. See
“Compensation Discussion and Analysis.”
The Compensation/Human Resource Committee
of Citizens Financial Services, Inc. and First Citizens Community Bank
Robert W. Chappell (Chairman)
Rinaldo A. DePaola
Thomas E. Freeman
Christopher W. Kunes
R. Joseph Landy
Alletta M. Schadler
COMPENSATION DISCUSSION AND ANALYSIS
Overview
The following discussion provides a description of our decision-making process and philosophy for compensating our named executive officers
in 2023. This discussion also describes the material components of each named executive officer’s total compensation package and details the reasoning behind the decisions made in 2023. This discussion should be read together with the compensation
tables for our named executive officers located in the “
Executive Compensation
” section of this proxy statement.
Our 2023 named executive officers are Randall E. Black – Chief Executive Officer/President, Mickey L. Jones – Senior Executive Vice
President/Chief Operating Officer, and David Z. Richards, Jr. – Senior Executive Vice President/Director of Emerging Markets.
Executive Summary
It is the intent of the Compensation/Human Resource Committee to provide our named executive officers with a total compensation package
that is market competitive, promotes the achievement of our strategic objectives and is aligned with operating and other performance metrics to support long-term shareholder value. In addition, we have structured our executive compensation program
to include elements that are intended to create an appropriate balance between risk and reward.
Fiscal Year 2023 Company Performance
The Company had net income of $17.8 million for 2023, which was $11.2 million less than 2022’s net income of $29.1 million. The decrease
was due to the one-time costs associated with acquisition of Huntingdon Valley Bancorp, Inc. (“HVB”). With the increase in market interest rates, organic loan growth was lower in 2023 than 2022 and totaled $44.0 million. Additionally, higher market
interest rates resulted in additional pressure on the Company’s deposit pricing during 2023 which also impacted the Company’s margin. The Company worked to strategically integrate HVB throughout 2023.
Highlights for the 2023 year include:
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