Peoples Financial Services and FNCB Bancorp shareholders approve merger
In a landmark decision, shareholders of Peoples Financial Services Corp. (“Peoples”) (Nasdaq: PFIS) and FNCB Bancorp, Inc. (“FNCB”) (Nasdaq: FNCB) have given their nod to the proposed merger, a strategic move that promises to reshape the regional banking landscape. The approval, granted at special meetings of their respective shareholders, paves the way for FNCB to merge with and into Peoples, with Peoples emerging as the surviving corporation. This merger is contingent upon securing regulatory approvals and satisfying other customary closing conditions as outlined in the Agreement and Plan of Merger dated September 27, 2023.
This all-stock transaction, valued at approximately $129.0 million based on Peoples’ 20-day volume weighted average stock price of $44.13 as of September 26, 2023, implies a price per share of approximately $6.44 for holders of FNCB Common Stock. Under the terms of the merger, FNCB shareholders are set to receive 0.1460 shares of Peoples common stock for each share of FNCB common stock they own. Post-merger, the shareholder ownership split will be approximately 71% for Peoples and 29% for FNCB, creating a formidable entity in the financial sector.
The merger heralds the creation of a bank holding company with nearly $5.5 billion in assets and a combined market capitalization of about $444 million. The new entity will hold the #2 deposit market share in the Scranton-Wilkes Barre metro statistical area and rank as the #5 Pennsylvania-headquartered community bank under $20 billion in total assets. Headquartered in Scranton, Pennsylvania, the merged company will operate under the “Peoples Financial Services Corp.” name and trade under the Peoples ticker symbol “PFIS” on the Nasdaq Stock Market. The banking operations will be consolidated under the “Peoples Security Bank and Trust Company” brand, signifying a unified approach to banking services.
The merger is expected to be significantly accretive to earnings per share for both entities, with Peoples seeing a 59% EPS accretion to its 2025 estimated EPS, inclusive of all merger synergies, and FNCB experiencing a 40+% accretion to its EPS. Moreover, the transaction is projected to enhance Peoples’ quarterly dividend to $0.6175 per share post-closing, representing a 51%+ increase from current levels without diluting FNCB shareholders.
Projected financial metrics for the year 2025, based on fully integrated plans, highlight the combined company’s promising future, with an anticipated annual net income of $63.6 million and an earnings per share of $6.29. Additionally, the merged entity aims 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%.
Governance of the combined company will be equally shared, with a 16-member board of directors comprising eight directors 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 role of Vice Chair. The executive team, led by Craig Best as CEO of the combined holding company and Gerard Champi as President, brings together seasoned leaders from both organizations, promising a smooth transition and a strong start for the new banking powerhouse.