Peoples Financial Services and FNCB Bancorp set to wrap up merger deal

Peoples Financial Services Corp. (Nasdaq: PFIS) and FNCB Bancorp, Inc. (“FNCB”) (Nasdaq: FNCB) have received all necessary regulatory approvals to finalize their merger, previously outlined in their Agreement and Plan of Merger dated September 27, 2023. The all-stock transaction, valued at approximately $129.0 million, is slated for completion on July 1, 2024, and marks a significant consolidation in the banking sector. This valuation is based on Peoples’ 20-day volume-weighted average stock price as of September 26, 2023.

Financial Highlights and Strategic Benefits

The merger is projected to create a formidable bank holding company with nearly $5.5 billion in assets and a combined market capitalization of about $444 million. This new entity will hold the second-largest deposit market share in the Scranton-Wilkes Barre metro area and will rank as the fifth-largest Pennsylvania-headquartered community bank with assets under $20 billion. Post-merger, the ownership split will be approximately 71% for Peoples shareholders and 29% for FNCB shareholders.

Under the terms of the merger, FNCB shareholders will receive 0.1460 shares of Peoples common stock for each share of FNCB common stock they own. This implies a price per share of approximately $6.44 for FNCB common stock holders. Furthermore, the transaction is expected to be significantly accretive to earnings per share (EPS) for both entities, with a projected 59% EPS accretion for Peoples and over 40% for FNCB by 2025, inclusive of all merger synergies.

Operational Integration and Governance

Post-merger, the combined company will be headquartered in Scranton, Pennsylvania, and will operate under the “Peoples Financial Services Corp.” name, continuing to trade under the Peoples ticker symbol “PFIS” on the Nasdaq Stock Market. Banking operations will be unified under the “Peoples Security Bank and Trust Company” brand, which signifies a strategic move towards a cohesive banking service model.

The governance of the merged entity will feature a 16-member board of directors, split evenly between representatives from each company. William E. Aubrey, II, the current Chair of Peoples, will serve as Chair of the combined board, with FNCB’s current Chair, Louis DeNaples, Sr., taking on the Vice Chair role. The executive team will be led by Craig Best as CEO and Gerard Champi as President, ensuring a seamless transition and robust leadership for the new banking powerhouse.

Future Projections and Market Position

Looking ahead to 2025, the integrated company anticipates an annual net income of $63.6 million and an earnings per share of $6.29. The merger is also expected to boost Peoples’ quarterly dividend to $0.6175 per share post-closing, representing a 51% increase from current levels. These enhancements reflect the strategic intent to achieve top-tier operating and return metrics, including a return on average assets of 1.11% and a return on average tangible common equity of 15.8%.

This merger between Peoples Financial Services Corp. and FNCB Bancorp, Inc. not only underscores their mutual commitment to growth and service excellence but also positions the combined entity as a leader in the regional banking landscape.