Peoples Financial (PFIS) & FNCB Bancorp Sign Merger Deal
Peoples Financial Services Corp. PFIS has entered into an agreement with FNCB Bancorp FNCB, wherein both companies agreed to combine in an all-stock merger transaction valued at $129 million.
The merger is expected to result in a combined bank holding company with approximately $5.5 billion in assets and a market capitalization of around $444 million.
The closing of the deal, subject to the approval of PFIS and FNCB shareholders, regulatory approvals and satisfaction of customary closing conditions, is expected in the first half of 2024.
Post the merger, the headquarters of the merged holding company will be based in Scranton, PA and the merged bank headquarters will be located in Dunmore, PA. The merged bank holding company will operate under the name of “Peoples Financial Services Corp.”, and will trade under the ticker symbol “PFIS”.
Merger Agreement Details
The total deal value of $129 million is based on the 20-day volume weighted average stock price of $44.13 for Peoples Financial common stock as of Sep 26, 2023. This implies $6.44 per share for FNCB common stockholders.
Per the terms of the agreement, which has been approved by the boards of both companies, FNCB shareholders will receive 0.1460 shares of Peoples Financial common stock for each share of FNCB common stock held. Upon completion of the merger, Peoples Financial shareholders are expected to hold approximately 71% of the outstanding shares of the combined company and the remaining 29% will be held by FNCB.
Financial Impact
The merger is expected to deliver an estimated 2025 EPS accretion of 59% for Peoples Financial, inclusive of all merger synergies and a tangible book value earn-back period of 2.4 years. For FNCB, the merger is projected to deliver more than 40% EPS accretion.
Post full integration, the combined company is anticipated to achieve impressive operating and return metrics on a pro forma basis for 2025. Particularly, in 2025, the combined company is expected to record an annual net income of $63.6 million and an annual EPS of $6.29. Also, a return on average assets of 1.11% and a return on average tangible common equity of 15.8% are estimated.
The financial metrics in the pro forma of the combined company are derived from the estimated cost synergies from the merger, expected purchase accounting adjustments and the expected closing time of the merger.
Post-closure, PFIS intends to increase its quarterly dividend by 61.75 cents per share, resulting in an annual dividend of $2.47 per share, resulting in a dividend payout ratio of 39%. With this, Peoples Financial’s annual cash dividend is expected to be 51% higher than the current level.
Management Comments
Craig Best, CEO and director of Peoples Financial, 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. 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."
Gerard Champi, CEO, president and director of FNCB, stated, "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. 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."
Over the past three months, shares of PFIS and FNCB have gained 0.2% and 9.4%, respectively, against the industry’s decline of 1.3%.
Image Source: Zacks Investment Research
Currently, PFIS carries a Zacks Rank #5 (Strong Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Inorganic Expansion Efforts by Other Firms
Eastern Bankshares, Inc. EBC, the stock holding company for Eastern Bank, has entered into an all-stock merger deal with Cambridge Bancorp CATC. Per the deal, Cambridge will merge with and into Eastern Bankshares. The completion of the deal, subject to receipt of regulatory approvals and approval by the shareholders of both companies, is expected in the first quarter of 2024.
Per the terms of the deal, which has been approved by the boards of both companies, Cambridge shareholders will receive 4.956 shares of Eastern Bankshares common stock for each share of CATC common stock they own.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
FNCB Bancorp, Inc. (FNCB): Free Stock Analysis Report
Peoples Financial Services Corp. (PFIS) : Free Stock Analysis Report
Cambridge Bancorp (CATC) : Free Stock Analysis Report
Eastern Bankshares, Inc. (EBC) : Free Stock Analysis Report
