Peoples Financial Services and FNCB Bancorp entered into a definitive agreement under which Peoples and FNCB will combine in an all-stock strategic merger valued at approximately $129 million based on a 20-day volume weighted average stock price for Peoples’ common stock of $44.13 as of Sept. 26, 2023, resulting in an implied price per share to holders of FNCB Common Stock of approximately $6.44 per share. Under the terms of the definitive agreement, which was unanimously approved by the boards of directors of both companies, upon the completion of the merger, the FNCB shareholders would receive 0.1460 shares of Peoples common stock for each share of FNCB common stock they own. The pro forma post-merger shareholder ownership split would be approximately 71% for Peoples and 29% for FNCB.
Highlights of the Transaction:
Strategic merger that creates a bank holding company with nearly $5.5 billion in assets and a combined market capitalization of approximately $444 million
The headquarters of the combined holding company will be located in Scranton, PA and the combined bank headquarters will be based in Dunmore, PA
The combined bank holding company will operate under the name “Peoples Financial Services Corp.” and will trade under the Peoples ticker symbol “PFIS” on the Nasdaq Stock Market. The combined bank will operate under the “Peoples Security Bank and Trust Company” brand
Both companies have closely aligned leadership cultures dedicated to the success of our customers, communities, employees and shareholders
Financial Benefits of the Merger:
The transaction is projected to deliver 59% EPS accretion to Peoples 2025 estimated EPS and inclusive of all merger synergies, with a tangible book value earn-back period of 2.4 years.
The transaction is projected to be 40-plus accretive to FNCB’s EPS. In addition, post-closing, Peoples plans to raise its quarterly dividend to $0.6175 per share, or to $2.47 per share on an annual basis, which will create no dilution for FNCB shareholders. Peoples’ post-closing annual cash dividend is projected to be 51%+ higher than current levels.
On a pro forma basis for the year 2025, the combined business is expected to deliver top-tier operating and return metrics upon fully phased-in integration plans, including:
- Annual Net Income of $63.6 million
- Annual Earnings per Share of $6.29
- Annual cash dividends per share $2.47 with a dividend payout ratio of 39%
- Return on average assets of 1.11%
- Return on average tangible common equity of 15.8%
The pro forma combined company financial metrics are based on estimated combined company cost synergies, anticipated purchase accounting adjustments and the expected merger closing time-frame.
Governance and Leadership:
The combined bank holding company’s board of directors will have 16 directors, consisting of eight directors from Peoples and eight directors from FNCB with Peoples’ current chair William E. Aubrey, II serving as chair of the combined board of directors and FNCB’s current chair, Louis DeNaples, Sr., will serve as vice chair of the combined board of directors.
- Craig Best, Peoples’ current CEO, will continue to serve in that role for the combined bank holding company and the combined bank.
- Gerard Champi, FNCB’s current president and CEO, will serve as president of the combined bank holding company and the combined bank.
- John Anderson, Peoples’ current CFO, will continue to serve in that role for the combined bank holding company and the combined bank.
- Thomas Tulaney, Peoples’ current COO, will continue to serve in that role for the combined bank holding company and the combined bank.
- James Bone Jr., CPA, FNCB’s current CFO, will serve as COO of the combined bank holding company and combined bank.
- The remainder of the executive team will be drawn from both Peoples and FNCB.
It is expected that at the one-year anniversary of the merger closing, Craig Best will retire as CEO, Gerard Champi will be appointed to the position of CEO of the combined bank holding company and the combined bank and Thomas Tulaney will be appointed to the office of president of the combined bank holding company and the combined bank. Craig Best will continue as a member of the board of directors of the combined holding company and the combined bank after the one-year anniversary of the merger.
“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,” Best said. “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 close relationship between both management teams and boards of directors will further benefit us in exceeding our customers’ expectations as we help them achieve their financial goals. We are looking forward to utilizing our combined management team’s mutual financial expertise and strengths to achieve our shared goals and vision to deliver value to our customers and shareholders. I am extremely happy to be working alongside Jerry who is an exceptional leader and long-serving industry veteran.”
“We are excited to partner with Peoples with whom we share a strong strategic vision. Due to the high degree of familiarity between our businesses, we believe that our combined management teams can leverage the benefits of both of our banks’ strengths to build long-term value for our customers, shareholders, communities and employees,” Champi said. “FNCB and Peoples’ mutual goal of constructing a customer-first focused outlook will bolster our ability to serve the communities in which we operate. We feel confident that this strategic combination will unlock our ability to create the most dynamic, well-equipped and competitive Pennsylvania community bank franchise. We are thrilled to have the opportunity to partner with Craig and his team. We have a tremendous amount of respect for Craig’s leadership and the high-quality franchise that he and his team have built over the years.”
Timing and Approvals
The transaction is expected to close in the first half of 2024, subject to satisfaction of customary closing conditions, including regulatory approvals and shareholder approval from both Peoples and FNCB shareholders. FNCB directors have entered into agreements with Peoples pursuant to which they have committed to vote their shares of FNCB common stock in favor of the merger. Peoples’ directors have entered into agreements with FNCB pursuant to which they have committed to vote their shares of Peoples common stock in favor of the merger. For additional information about the proposed merger of FNCB with and into Peoples, shareholders are encouraged to carefully read the definitive agreement that will be filed with the Securities and Exchange Commission.
Cedar Hill Advisors acted as financial advisor to Peoples in the transaction. D.A. Davidson & Co. acted as financial advisor to Peoples and delivered a fairness opinion to the board of directors of Peoples. Troutman Pepper Hamilton Sanders served as legal counsel to Peoples. Stephens acted as financial advisor to FNCB and delivered a fairness opinion to the board of directors of FNCB. Cozen O’Connor served as transaction legal counsel to FNCB and Stevens & Lee served as regulatory legal counsel to FNCB.