Peoples Financial To Merge With FNCB Bancorp, Creates Bank With Assets Worth $5.5B & More

Peoples Financial Services Corp PFIS penned a merger agreement with FNCB Bancorp Inc FNCB in an all-stock deal valued at approximately $129.0 million.

The transaction value is based on a 20-day volume-weighted average stock price for PFIS common stock of $44.13 as of September 26, 2023, resulting in an implied price to FNCB common shareholders of about $6.44 per share. 

The merger will create a bank holding company with nearly $5.5 billion in assets and a combined market capitalization of about $444 million.

The combined bank will operate under the name "Peoples Financial Services Corp." and trade under the ticker "PFIS" on the Nasdaq Stock Market.

As per the terms unanimously approved by the boards of directors of both companies, post-merger, the FNCB shareholders would receive 0.1460 PFIS common stock for each share of FNCB they own. 

Following the merger closure, PFIS shareholders will own around 71% of the combined company, with FNCB will hold the remaining 29%.

Craig Best, Peoples Chief Executive Officer and Director, said, "This strategic merger accelerates our objective of creating a dynamic, top-tier Pennsylvania franchise in order to help our communities become a better place to live and work while offering the best services possible to our customers. Notably, this transaction will create a more diversified and liquid balance sheet, which will enable the combined company to accelerate its organic growth strategy."

The transaction is expected to close in Q1 2024, subject to customary closing conditions.

Synergies: The deal is expected to be 59% accretive to PFIS' 2025 estimated EPS (inclusive of all merger synergies) with a tangible book value earn-back period of 2.4 years and 40%+ accretive to FNCB's EPS. 

Dividend Increase: Post-deal-closure, PFIS plans to boost its quarterly dividend per share to $0.6175 or $2.47 annually, which will create no dilution for FNCB shareholders, and PFIS annual cash dividend is projected to be 51%+ higher than current levels.

Outlook: For 2025, on a pro forma basis, the combined business is projected to have an annual net income of $63.6 million and EPS of $6.29. Also, cash dividends per share are expected to be $2.47 (with a dividend payout ratio of 39%), a Return on Average Assets of 1.11%, and a Return on Average Tangible Common Equity of 15.8%.

Leadership: The combined company will be led by PFIS' current CEO, Craig Best, in the same role and FNCB's current President and Chief Executive Officer, Gerard Champi, as President.

PFIS expects that at the one-year anniversary of the merger closing, Craig Best will retire as CEO, and Gerard Champi will be appointed as the new CEO of the combined bank.

Price Action: PFIS shares closed at $43.78, while FNCB closed higher by 6.67% at $6.48 on Wednesday.