Peoples Financial and FNCB Bancorp enter into merger agreement

Peoples Financial (PFIS) and FNCB Bancorp (FNCB) have entered into a definitive agreement under which Peoples and FNCB will combine in an all-stock strategic merger valued at approximately $129.0M based on a 20-day volume weighted average stock price for Peoples’ common stock of $44.13 as of September 26, 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. The merger creates a bank holding company with nearly $5.5B in assets and a combined market capitalization of approximately $444M. The headquarters of the combined holding company will be located in Scranton, Pennsylvania and the combined bank headquarters will be based in Dunmore, Pennsylvania. The combined bank holding company will operate under the name “Peoples Financial Services Corp.” and will trade under the Peoples ticker symbol “PFIS” on Nasdaq. The combined bank will operate under the “Peoples Security Bank and Trust Company” brand. 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+ 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. For the year 2025, the combined business is expected to deliver: annual net income of $63.6M, annual EPS of $6.29, annual cash dividends per share $2.47 with a dividend payout ratio of 39%; a Return on Average Assets of 1.11%; and Return on Average Tangible Common Equity of 15.8%. 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., 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 CEO, will serve as President of the combined bank holding company and the combined bank. 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. 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.