PFIS Peoples Financial Services Corporation

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 8-K

(Amendment No. 1)

 

CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

Date of Report: July 1, 2024

(Date of earliest event reported)

 

PEOPLES FINANCIAL SERVICES CORP.

(Exact name of registrant as specified in its Charter)

 

PA		001-36388		23-2391852
(State or other jurisdiction		(Commission file number)		(IRS Employer
of incorporation)				Identification No.)

 

150 North Washington Avenue, Scranton, Pennsylvania 18503-1848

(Address of Principal Executive Offices) (Zip Code)

 

(570) 346-7741

(Registrant’s telephone number, including area code)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (See General Instruction A.2.):

 

¨	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

¨	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

¨	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

¨	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Common Stock, $2.00 par value		PFIS		The Nasdaq Stock Market LLC

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

 

Emerging growth company ¨

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

 

 

Explanatory Note

 

Effective July 1, 2024 (the “Closing Date”), Peoples Financial Services Corp., a Pennsylvania corporation (“Peoples”), completed its previously announced merger with FNCB Bancorp, Inc., a Pennsylvania corporation (“FNCB”), pursuant to the Agreement and Plan of Merger dated September 27, 2023 between Peoples and FNCB (the “Merger Agreement”).

 

Pursuant to the Merger Agreement, on the Closing Date, FNCB merged with and into Peoples, with Peoples continuing as the surviving corporation (the “Merger”), and immediately following the Merger, FNCB Bank, a Pennsylvania-chartered bank (“FNCB Bank”), merged with and into Peoples Security Bank and Trust Company, a Pennsylvania-chartered bank and trust company and a wholly owned subsidiary of Peoples (“Peoples Bank”), with Peoples Bank as the surviving bank.

 

On July 1, 2024, Peoples filed a Current Report on Form 8-K, reporting the completion of the Merger (the “Original Report”). This Amendment No. 1 to the Original Report is being filed with the Securities and Exchange Commission solely to amend and supplement item 9.01 of the Original Report, as described in Item 9.01 below. This Amendment No. 1 makes no other amendments to the Original Report.

 

The pro forma financial information included in this Amendment No. 1 has been presented for informational purposes only and does not purport to represent the actual results that Peoples and FNCB would have achieved had the companies been combined during the periods presented, and is not intended to project any future results of operations for the combined company.

 

Item 9.01

Financial Statements and Exhibits

 

(a) Financial statements of business acquired

 

The audited consolidated financial statements of FNCB as of and for the years ended December 31, 2023, and 2022, including the independent auditor’s report, are filed herewith as Exhibit 99.1 and are incorporated by reference into this item 9.01(a). The unaudited consolidated financial statements of FNCB as of and for the three months ended March 31, 2024, are filed herewith as Exhibit 99.2 and are incorporated by reference into this item 9.01(a).

 

(b) Pro forma financial information

 

The unaudited pro forma condensed consolidated combined financial information as of and for the three months ended March 31, 2024, and for the year ended December 31, 2023, is filed herewith as Exhibit 99.3 and is incorporated by reference into this item 9.01(b).

 

(d) Exhibits

 

Exhibit No.		Description
23.1*		Consent of Baker Tilly US, LLP, Independent Registered Public Accounting Firm for FNCB
99.1		Audited consolidated financial statements of FNCB as of and for the years ended December 31, 2023, and 2022 (incorporated by reference to the Annual Report on Form 10-K for the year ended December 31, 2023, filed by FNCB March 8, 2024. (File No. 001-38408))
99.2		Unaudited consolidated financial statements of FNCB as of and for the three months ended March 31, 2024 and 2023 (incorporated by reference to the Quarterly report on Form 10-Q for the quarterly period ended March 31, 2024, by FNCB filed on May 3, 2024 (File No. 001-38408))
99.3*		Unaudited Pro Forma Condensed Combined Consolidated Financial Information as of and for the three months ended March 31, 2024, and for the year ended December 31, 2023
104		Cover Page Interactive Data File (embedded within the Inline XBRL document)

 

*Filed herewith

 

 

SIGNATURE

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

	PEOPLES FINANCIAL SERVICES CORP.
	By:	/s/ Craig W. Best
		Craig W. Best Chief Executive Officer
		(Principal Executive Officer)
Dated: September 16, 2024

 

 

 

Exhibit 23.1

 

Consent of Independent Registered Public Accounting Firm

 

We consent to the incorporation by reference in the Registration Statements on Forms S-8 (No. 333-280652, No. 333-272482 and No. 333-219090) of Peoples Financial Services Corp. of our report dated March 8, 2024, relating to the consolidated financial statements of FNCB Bancorp, Inc. and Subsidiaries, which appears in Exhibit 99.1 to this Amendment No. 1 to Current Report on Form 8-K/A.

 

/s/ BAKER TILLY US, LLP

 

BAKER TILLY US, LLP

Iselin, New Jersey

September 16, 2024

 

 

  

Exhibit 99.3

 

UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS

 

The unaudited pro forma combined condensed consolidated financial information has been prepared using the acquisition method of accounting under the provisions of the Financial Accounting Standards Board Accounting Standards Codification 805, “Business Combinations”, giving effect to the merger of FNCB Bancorp, Inc. (“FNCB”) with and into Peoples Financial Services Corp. (“Peoples”), with Peoples as the surviving corporation. Under this method, FNCB assets and liabilities as of the date of the acquisition will be recorded at their respective fair values and added to those of Peoples. Any difference between the purchase price for FNCB and the fair value of the identifiable net assets acquired (including core deposit intangibles) will be recorded as goodwill. The goodwill resulting from the acquisition will not be amortized to expense, but instead will be reviewed for impairment at least annually. Any core deposit intangible and other intangible assets with estimated useful lives to be recorded by Peoples in connection with the acquisition will be amortized to expense over such intangible asset’s estimated useful life. The financial statements of Peoples issued after the acquisition will reflect the results attributable to the acquired operations of FNCB beginning on the date of completion of the acquisition. The merger was consummated on July 1, 2024.

 

The unaudited pro forma condensed combined financial information and accompanying notes are based on and should be read in conjunction with the historical consolidated financial statements of Peoples included in its Quarterly Report on Form 10-Q for the quarter ended March 31, 2024, as filed with the SEC on May 8, 2024, and the historical consolidated financial statements of FNCB included in FNCB’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2024, which is included as Exhibit 99.2 to this Current Report on Form 8-K.

 

The unaudited pro forma condensed combined financial information is provided for illustrative information purposes only. The unaudited pro forma condensed combined financial information is not necessarily, and should not be assumed to be, an indication of the actual results that would have been achieved had the merger been completed as of the dates indicated or that may be achieved in the future. The unaudited pro forma combined condensed financial statements have been prepared in accordance with Article 11 of Regulation S-X, Pro Forma Information, which requires the depiction of the accounting for the transaction, which we refer to as transaction accounting adjustments. Regulation S-X also allows for management adjustments that could include presentation of the reasonably estimable cost savings and revenue enhancements and other transaction effects that have occurred or are reasonably expected to occur. Peoples has elected to present certain management adjustments which include a $241.5 million balance sheet restructuring by selling $241.5 million of investment securities available for sale and paying down $106.8 million of FHLB short term borrowings with the remaining cash balance being invested in federal funds sold. Please note the unaudited pro forma condensed combined financial information does not include management adjustments for any potential effects of changes in market conditions, revenue enhancements or expense efficiencies, among other factors.

 

The following unaudited pro forma combined consolidated balance sheet as of March 31, 2024, combines the unaudited consolidated balance sheet of Peoples as of March 31, 2024, with the unaudited statement of financial condition of FNCB as of March 31, 2024, giving effect to the transaction as if it had been consummated March 31, 2024. The unaudited pro forma condensed combined statements of income for the three months ended March 31, 2024, combines the unaudited consolidated statements of income of Peoples for the three months ended March 31, 2024 with the unaudited consolidated statement of operations of FNCB for the three months ended March 31, 2024, giving effect to the transaction as if it had been consummated on January 1, 2024. The unaudited pro forma condensed combined statement of operations for the year ended December 31, 2023, combines the audited consolidated statements of income of Peoples for the year ended December 31, 2023, with the audited consolidated statements of income of FNCB for the year ended December 31, 2023 (included as Exhibit 99.1 to this Current Report on Form 8-K), giving effect to the transaction as if it had been consummated on January 1, 2023. Certain reclassification adjustments have been made to FNCB’s financial statements to conform to Peoples’ financial statement presentation.

 

 

The unaudited pro forma condensed consolidated financial statements were prepared with Peoples as the accounting acquirer and FNCB as the accounting acquiree under the acquisition method of accounting. Accordingly, the consideration paid by Peoples to complete the acquisition of FNCB will be allocated to FNCB’s assets and liabilities based upon their estimated fair values as of the date of completion of the acquisition. The allocation is dependent upon certain valuations and other studies that have not been finalized at this time; however, preliminary significant valuations based on the fair value of the acquired assets and liabilities have been estimated and included in the unaudited condensed pro forma financial statements.

  

The fair value adjustments made to the acquired assets and liabilities are considered preliminary at this time and are subject to change as Peoples finalizes its fair value determinations. Increases or decreases in the estimated fair values of the net assets as compared with the information shown in the unaudited pro forma combined condensed consolidated financial information may change the amount of the purchase price allocated to goodwill and other assets and liabilities and may impact Peoples’ consolidated statements of income due to adjustments in yield and/or amortization of the adjusted assets or liabilities. Any changes to FNCB shareholders’ equity, including results of operations from March 31, 2024, through the closing date will also change the purchase price allocation, which may include the recording of a lower or higher amount of goodwill. The final adjustments may be materially different from the transaction accounting adjustments presented herein. The total estimated purchase price for the purpose of this pro forma financial information is $133.7 million utilizing FNCB common shares settled on the closing date as of July 1, 2024, and Peoples’ closing common stock price of $45.54 as of June 28, 2024, for fair value of purchase price consideration which was closing price on the last trading date prior to the merger closing date on July 1, 2024.

 

The pro forma statements of income and per share data information do not include anticipated cost savings or revenue enhancements, nor does it include one-time merger-related expenses which will be expensed against income. FNCB and Peoples are currently in the process of assessing the two companies’ personnel, benefits plans, premises, equipment, computer systems and service contracts to determine where the companies may take advantage of redundancies or where it will be beneficial or necessary to convert to one system. Certain decisions arising from these assessments may involve canceling contracts between either FNCB or Peoples and certain service providers. There is no assurance that the anticipated cost savings will be realized on the anticipated time schedule or at all.

 

The pro forma combined basic and diluted earnings per share of Peoples common stock is based on the pro forma combined net income per common share for FNCB and Peoples divided by the pro forma basic or diluted common shares of the combined entities for the periods presented on such statements of income. The pro forma information includes adjustments related to the fair value of assets and liabilities of FNCB and is subject to adjustment as additional information becomes available and as final merger date analyses are performed. The pro forma combined balance sheet and book value per share data includes the impact of merger related expenses on the balance sheet with FNCB’s after-tax charges currently estimated at $1.9 million, illustrated as an adjustment to accrued other liabilities, and Peoples’ after-tax estimated charges of $10.7 million, illustrated as an adjustment to retained earnings and to accrued other liabilities. The pro forma combined book value per share of Peoples common stock is based on the pro forma combined common stockholders’ equity of FNCB and Peoples divided by total pro forma common shares of the combined entities.

 

The unaudited pro forma data are qualified by the statements set forth under this caption and should not be considered indicative of the market value of Peoples common stock or the actual or future results of operations of Peoples for any period. Actual results may be materially different than the pro forma information presented.

 

 

Unaudited Combined Pro Forma Balance Sheets as of March 31, 2024

($ in Thousands, Except Per Share Data)

 

		Peoples				FNCB				Transaction Accounting Adjustments					Peoples Pro Forma Combined before Management Adjustments				Management Adjustments					Peoples Pro Forma Combined after Management Adjustments
Assets:
Cash and cash equivalents
Cash and due from banks		$	32,009			$	18,323			$	(32	)(1)			$	50,300			$	-				$	50,300
Interest-bearing deposits in other banks			8,259				52,266				-					60,525				-					60,525
Federal funds sold			69,700				-				-					69,700				21,942	(14)				91,642
Total cash and cash equivalents			109,968				70,589				(32	)				180,525				21,942					202,467
Investment securities:
Available-for-sale			394,413				442,120				(4,367	)(3)				832,166				(241,488	)(14)				590,678
Equity investments carried at fair value			91				4,373				-					4,464				-					4,464
Held-to-maturity			83,306				-				-					83,306				-					83,306
Total investment securities			477,810				446,493				(4,367	)				919,936				(241,488	)				678,448
Loans			2,858,712				1,250,225				(70,036	)(4)				4,038,901				-					4,038,901
Less: allowance for credit losses			22,597				12,455				3,312	(5)				38,364				-					38,364
Net loans			2,836,115				1,237,770				(73,348	)				4,000,537				-					4,000,537
Goodwill			63,370				-				15,100	(1)				78,470				-					78,470
Premises and equipment, net			59,097				14,256				593	(6)				73,946				-					73,946
Bank owned life insurance			49,673				36,667				-					86,340				-					86,340
Deferred tax assets			14,241				14,250				10,465	(7)				38,956				-					38,956
Accrued interest receivable			13,565				7,590				-					21,155				-					21,155
Intangible assets, net			-				-				37,617	(8)				37,617									37,617
Other assets			45,299				38,367				(1,599	)(9)				82,067				-					82,067
Total assets		$	3,669,138			$	1,865,982			$	(15,571	)			$	5,519,549			$	(219,546	)			$	5,300,003
Liabilities:
Deposits:
Noninterest-bearing		$	623,408			$	286,286			$	-				$	909,694			$	-				$	909,694
Interest-bearing			2,580,530				1,195,008				(2,405	)(10)				3,773,133				-					3,773,133
Total deposits			3,203,938				1,481,294				(2,405	)				4,682,827				-					4,682,827
Borrowings			45,260				219,546				(851	)(11)				263,955				(219,546	)(14)				44,409
Trust preferred			-				10,310				(2,318	)(12)				7,992				-					7,992
Subordinated debt			33,000				-				-					33,000				-					33,000
Accrued interest payable			5,327				1,284				-					6,611				-					6,611
Other liabilities			41,621				15,803				15,802	(13)				73,226				-					73,226
Total liabilities			3,329,146				1,728,237				10,228					5,067,611				(219,546	)				4,848,065
Stockholders’ equity:
Common stock			14,122				24,743				(18,872	)(1)(2)				19,993				-					19,993
Capital surplus			122,162				78,412				49,398	(1)(2)				249,972				-					249,972
Retained earnings			249,123				73,522				(95,257	)(2)(5)(13)				227,388				-					227,388
Accumulated other comprehensive loss			(45,415	)			(38,932	)			38,932	(2)				(45,415	)			-					(45,415	)
Total stockholders’ equity			339,992				137,745				(25,799	)				451,938				-					451,938
Total liabilities and stockholders’ equity		$	3,669,138			$	1,865,982			$	(15,571	)			$	5,519,549			$	(219,546	)			$	5,300,003
Per share data
Shares Outstanding			7,057,258				19,795,151				(16,859,695	)(1)				9,992,714				-					9,992,714
Book Value Per Share		$	48.18			$	6.96								$	45.23								$	45.23

 

 

Unaudited Pro Forma Combined Statements of Income for three months ended March 31, 2024

($ in Thousands, Except Per Share Data)

  

		Peoples				FNCB				Transaction Accounting Adjustments				Peoples Pro Forma Combined before Management Adjustments				Management Adjustments				Peoples Pro Forma Combined After Management Adjustments
Interest income:
Interest and fees on loans:		$	35,459			$	18,320			$	4,603	(4)		$	58,382			$	-			$	58,382
Interest and dividends on investment securities:			2,291				4,387				2,851	(3)			9,529				(3,027	)(14)			6,502
Interest on interest-bearing deposits in other banks			120				178				-				298				-				298
Interest on federal funds sold			1,127				-				-				1,127				1,818	(14)			2,945
Total interest income			38,997				22,885				7,454				69,336				(1,209	)			68,127
Interest expense:
Interest on deposits			18,704				7,543				834	(10)			27,081				-				27,081
Interest on borrowings			532				1,923				109	(11)			2,564				(1,515	)(14)			1,049
Interest on subordinated debt			443				190				23	(12)			656				-				656
Total interest expense			19,679				9,656				966				30,301				(1,515	)			28,786
Net interest income			19,318				13,229				6,488				39,035				306				39,341
Provision for credit losses			708				1,486				-				2,194				-				2,194
Net interest income after provision for credit losses			18,610				11,743				6,488				36,841				306				37,147
Noninterest income:
Service charges, fees, commissions and other			2,036				1,070				-				3,106				-				3,106
Merchant services income			115				129				-				244				-				244
Commission and fees on fiduciary activities			551				-				-				551				-				551
Wealth management income			361				304				-				665				-				665
Mortgage banking income			92				-				-				92				-				92
Increase in cash surrender value of life insurance			279				226				-				505				-				505
Interest rate swap (loss) gain			(24	)			-				-				(24	)			-				(24	)
Net losses on equity investment securities			(8	)			(413	)			-				(421	)			-				(421	)
Net gains on sale of investment securities available for sale			-				-				-				-				-				-
Other income			-				312				-				312				-				312
Total noninterest income			3,402				1,628				-				4,718				-				5,030
Noninterest expense:
Salaries and employee benefits expense			8,839				5,193				-				14,032				-				14,032
Net occupancy and equipment expense			4,725				813				6	(6)			5,544				-				5,544
Acquisition related expenses			486				284				(770	)(13)			-				-				-
Amortization of intangible assets			-				-				1,710	(8)			1,710				-				1,710
Net gains on sale of other real estate owned			-				-				-				-				-				-
Professional fees and outside services			688				317				-				1,005				-				1,005
FDIC insurance and assessments			594				302				-				896				-				896
Donations			409				253				-				662				-				662
Other expenses			2,327				2,025				-				4,352				-				4,352
Total noninterest expense			18,068				9,187				946				28,201				-				28,201
Income before income taxes			3,944				4,184				5,542				13,358				306				13,976
Provision for income tax expense			478				652				1,842	(7)(13)			2,972				64	(14)			3,036
Net income		$	3,466			$	3,532			$	3,700			$	10,386			$	242			$	10,940
Per share data
Basic earnings per common share		$	0.49			$	0.18			$	-			$	1.04			$	-			$	1.10
Diluted earnings per common share		$	0.49			$	0.18			$	-			$	1.03			$	-			$	1.09
Basic weighted average common shares outstanding			7,052,912				19,793,235				(16,857,779	)(1)			9,988,368				-				9,988,368
Diluted weighted average common shares outstanding			7,102,112				19,795,213				(16,859,757	)(1)			10,037,568				-				10,037,568

   

 

Unaudited Pro Forma Combined Statements of Income for twelve months ended December 31, 2023

($ in Thousands, Except Per Share Data)

 

		Peoples				FNCB				Transaction Accounting Adjustments				Peoples Pro Forma Combined before Management Adjustments				Management Adjustments				Peoples Pro Forma Combined
Interest income:
Interest and fees on loans:		$	134,641			$	65,364			$	16,917	(4)		$	216,922			$	-			$	216,922
Interest and dividends on investment securities:			9,498				15,649				11,402	(3)			36,549				(12,107	)(14)			24,442
Interest on interest-bearing deposits in other banks			335				1,011				-				1,346				-				1,346
Interest on federal funds sold			5,377				-				-				5,377				7,273	(14)			12,650
Total interest income			149,851				82,024				28,319				260,194				(4,834	)			255,360
Interest expense:
Interest on deposits			58,561				24,461				1,856	(10)			84,878				-				84,878
Interest on borrowings			2,762				8,942				409	(11)			12,113				(6,060	)(14)			6,053
Interest on subordinated debt			1,774				724				96	(12)			2,594				-				2,594
Total interest expense			63,097				34,127				2,361				99,585				(6,060	)			93,525
Net interest income			86,754				47,897				25,958				160,609				1,226				161,835
Provision for credit losses			566				1,880				-				2,446				-				2,446
Net interest income after provision for credit losses			86,188				46,017				25,958				158,163				1,226				159,389
Noninterest income:
Service charges, fees, commissions and other			7,728				4,537				-				12,265				-				12,265
Merchant services income			693				592				-				1,285				-				1,285
Commission and fees on fiduciary activities			2,219				-				-				2,219				-				2,219
Wealth management income			1,576				944				-				2,520				-				2,520
Mortgage banking income			390				6				-				396				-				396
Increase in cash surrender value of life insurance			1,067				752				-				1,819				-				1,819
Interest rate swap (loss) gain			390				237				-				627				-				627
Net losses on equity investment securities			(11	)			(1,601	)			-				(1,612	)			-				(1,612	)
Net gains on sale of investment securities available for sale			81				252				-				333				-				333
Other income			-				926				-				926				-				926
Total noninterest income			14,133				6,645				-				19,852				-				20,778
Noninterest expense:
Salaries and employee benefits expense			35,285				20,234				-				55,519				-				55,519
Net occupancy and equipment expense			17,146				3,119				23	(6)			20,288				-				20,288
Acquisition related expenses			1,816				1,480				(3,296	)(13)			-				-				-
Amortization of intangible assets			105				-				6,839	(8)			6,944				-				6,944
Net gains on sale of other real estate owned			(18	)			-				-				(18	)							(18	)
Professional fees and outside services			2,810				1,093				-				3,903				-				3,903
FDIC insurance and assessments			2,131				1,115				-				3,246				-				3,246
Donations			1,619				575				-				2,194				-				2,194
Other expenses			6,926				9,306				-				16,232				-				16,232
Total noninterest expense			67,820				36,922				3,566				108,308				-				108,308
Income before income taxes			32,501				15,740				22,392				69,707				1,226				71,859
Provision for income tax expense			5,121				2,757				4,599	(7)(13)			12,477				257	(14)			12,734
Net income		$	27,380			$	12,983			$	17,793			$	57,230			$	969			$	59,125
Per share data
Basic earnings per common share		$	3.85			$	0.66			$	-			$	5.70			$	-			$	5.89
Diluted earnings per common share		$	3.83			$	0.66			$	-			$	5.67			$	-			$	5.86
Basic weighted average common shares outstanding			7,107,908				19,740,493				(16,805,037	)(1)			10,043,364				-				10,043,364
Diluted weighted average common shares outstanding			7,151,471				19,742,618				(16,807,162	)(1)			10,086,927				-				10,086,927

 

 

Unaudited Pro Forma Per Share Data

For The Three Months Ended March 31, 2024

($ in Thousands, Except Per Share Data)

 

		Peoples				FNCB				Pro Forma Combined				Pro Forma Equivalent FNCB Share (A)
For The Three Months Ended March 31, 2024:
Earnings per share:
Net income per share (Basic)		$	0.49			$	0.18			$	1.10			$	0.16
Net income per share (Diluted)		$	0.49			$	0.18			$	1.09			$	0.16
Book Value per common share as of March 31, 2024		$	48.18			$	6.96			$	45.23			$	6.60

 

Unaudited Pro Forma Per Share Data

For The Twelve Months Ended December 31, 2023

($ in Thousands, Except Per Share Data)

 

		Peoples				FNCB				Pro Forma Combined				Pro Forma Equivalent FNCB Share (A)
For The Twelve Months Ended December 31, 2023:
Earnings per share
Net income per share (Basic)		$	3.85			$	0.66			$	5.89			$	0.86
Net income per share (Diluted)		$	3.83			$	0.66			$	5.86			$	0.86
Book Value per common share as of December 31, 2023		$	44.06			$	6.80			$	42.02			$	6.14

 

(A)

The pro forma equivalent FNCB per share amount is calculated by multiplying the pro forma combined per share amount by the exchange ratio of 0.146 in accordance with the merger agreement.

 

NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS

 

TRANSACTION ACCOUNTING ADJUSTMENTS:

 

(1)

On July 1, 2024, the merger closing date, each share of common stock of FNCB was converted into 0.1460 shares of Peoples common stock, subject to the payment of cash in lieu of fractional shares of Peoples common stock. The parties intend for the merger to qualify as a “reorganization” within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended.

 

The total estimated purchase price for the purpose of this pro forma financial information is $133.7 million utilizing FNCB common shares settled on the closing date as of July 1, 2024, and Peoples’ closing common stock price of $45.54 as of June 28, 2024, for fair value of purchase price consideration which was the closing price on the last trading date prior to the merger closing date of July 1, 2024. The adjustment for shares outstanding, basic and diluted weighted average common shares outstanding is an amount to adjust the shares to equal the new shares issued for the transaction

 

The following is a summary of the fair value of assets acquired and liabilities assumed resulting in goodwill. Goodwill is created when the purchase price consideration exceeds the fair value of the net assets acquired. For purposes of this analysis as of March 31, 2024, goodwill of $15.1 million results from the transaction; however, the final purchase accounting analysis will be performed as of the merger date and amounts therein are subject to change based on operations subsequent to March 31, 2024, as additional information becomes available and as additional analyses are performed.

 

 

(dollars in thousands, except per share data)
Purchase price
Common shares of FNCB settled as of June 30, 2024			20,110,771
Exchange ratio			0.1460
Peoples shares to be issued		$	2,935,456
Price per share of Peoples common stock (closing stock price as of June 28, 2024).		$	45.54
Purchase price consideration for common stock		$	133,681
Cash in lieu of fractional shares		$	32
Purchase price consideration for common stock		$	133,713

 

		FNCB Book Value 3/31/2024				Fair Value Adjustments				FNCB Fair Value 3/31/2024
Total purchase price consideration										$	133,713
Recognized amounts of identifiable assets acquired and liabilities assumed
Cash and cash equivalents		$	70,589			$	-			$	70,589
Federal funds sold			-				-				-
Securities, available for sale			442,120				(4,367	)(3)			437,753
Equity securities			4,373				-				4,373
Loans gross			1,250,225				(70,036	)(4)			1,180,189
Allowance credit losses			(12,455	)			10,644	(5)			(1,811	)
Loans, net of allowance			1,237,770				(59,392	)			1,178,378
Restricted stock			-				-				-
Premises and equipment			14,256				593	(6)			14,849
Accrued interest receivable			7,590				-				7,590
Other identifiable intangible assets			-				37,617	(8)			37,617
Deferred tax asset			14,250				4,927	(7)			19,177
Other assets			75,034				(1,599	)(9)			73,435
Total identifiable assets acquired			1,865,982				(22,221	)			1,843,761
Deposits			1,481,294				(2,405	)(10)			1,478,889
Borrowings			219,546				(851	)(11)			218,695
Trust Preferred			10,310				(2,318	)(12)			7,992
Accrued interest payable			1,284				-				1,284
Other liabilities			15,803				2,485	(13)			18,288
Total liabilities assumed			1,728,237				(3,089	)			1,725,148
Total identifiable net assets		$	137,745			$	(19,132	)			118,613
Goodwill										$	15,100

 

(2)

Balance sheet adjustments reflect the reversal of FNCB’s historical equity accounts to capital surplus and to record the purchase price consideration for common stock. The following tables summarize the transaction accounting adjustments for the equity accounts.

 

						Balance Sheet
						3/31/2024
Transaction accounting adjustment for common stock
Reversal of FNCB's common stock						$	(24,743	)
Number of Peoples shares issued			2,935,456
Par value of Peoples common stock		$	2.00
Par value of Peoples shares issued for merger							5,871
Total transaction accounting adjustment for common stock						$	(18,872	)

 

 

						Balance Sheet
						3/31/2024
Transaction accounting adjustment for capital surplus
Reversal of FNCB common stock to capital surplus						$	24,743
Reversal of FNCB retained earnings to capital surplus							73,522
Reversal of FNCB accumulated other comprehensive loss to capital surplus							(38,932	)
Reversal of FNCB treasury stock to capital surplus							-
Net change in noncontroling interest in consolidated subsidiaries							-
Shares of FNCB			20,110,771
Exchange ratio			0.146
Number of Peoples Shares issued			2,935,456
Value assigned to Peoples common shares		$	45.54
Purchase price consideration for common stock			133,681
Less: par value of Peoples common stock			5,871
capital surplus adjustment for Peoples shares issued			127,810
Less: FNCB Equity			(137,745	)
Net adjustment to capital surplus for stock consideration							(9,935	)
Total transaction accounting adjustment for capital surplus						$	49,398

 

		Balance Sheet
		3/31/2024
Transaction accounting adjustment for retained earnings
Reversal of FNCB retained earnings		$	(73,522	)
Peoples merger costs			(10,710	)
Provision for loan losses for Non-PCD loans			(11,025	)
Total transaction accounting adjustment for retained earnings		$	(95,257	)
		Balance Sheet
		3/31/2024
Transaction accounting adjustment for accumulated other comprehensive loss
Reversal of FNCB accumulated other comprehensive loss		$	38,932
Total transaction accounting adjustment for accumulated other comprehensive loss		$	38,932

 

(3)

Balance sheet and income statement adjustment to reflect the negative fair value adjustment for securities available for sale of $4.4 million. Adjustment to statements of income includes prospective reclassification of existing available-for-sale securities fair value adjustment of $53.5 million to an amortizing discount which will be amortized into income based on the expected life of securities.

 

		Balance Sheet				Statements of Income
		3/31/2024				Three Months Ended 3/31/2024				Twelve Months Ended 12/31/2023
Securities available for sale		$	(4,367	)		$	2,851			$	11,402
Total investment securities		$	(4,367	)		$	2,851			$	11,402

 

 

 

(4)

Balance sheet adjustment to reflect the fair value discount for acquired purchased credit deteriorated (“PCD”) loans and non-PCD loans of $70.0 million of which $70.7 million is assigned to loans and $1.8 million is assigned to the allowance for credit losses (recorded to allowance for credit losses in footnote 5). The accruing loan fair value adjustments will be substantially recognized over the expected life of the loans. Additional balance sheet adjustment reverses existing deferred fees, loan discounts and premiums of $1.2 million and the reversal of mortgage loan hedge fair value adjustment of $52 thousand.

 

		Balance Sheet				Statements of Income
		3/31/2024				Three Months Ended 3/31/2024				Twelve Months Ended 12/31/2023
Fair value adjustments on loans acquired
Non-PCD loans interest rate fair value		$	(47,659	)		$	2,969			$	11,043
Non-PCD loans general credit fair value			(16,715	)			1,541				5,546
Fair value adjustment assigned to Non-PCD loans			(64,374	)			4,511				16,590
PCD Accruing loans fair value			(3,626	)			92				327
PCD Non-accruing loans fair value			(2,712	)			-				-
Fair value adjustment assigned to PCD loans			(6,338	)			92				327
Total fair value adjustments for loans			(70,712	)			4,603				16,917
PCD Accruing loan ACL			1,811				-				-
Fair value of PCD loans assigned to allowance for credit losses			1,811				-				-
Reversal of existing deferred fees and costs			(1,187	)			-				-
Reversal of existing mortgage loan hedge fair value			52				-				-
Total loan adjustments		$	(70,036	)		$	4,603			$	16,917

 

(5)

Balance sheet adjustment for the reversal of FNCB’s existing allowance for credit losses of $12.5 million. Balance sheet adjustment of $1.8 million of PCD loan fair value assigned to the allowance for credit losses. Balance sheet and equity adjustment for the current expected credit loss allowance for credit losses of $14.0 million for acquired non-PCD loans. The pro forma statements of income does not include a one-time provision expense of $14.0 million related to allowance for credit losses for non-PCD loans as it is shown as a direct equity adjustment to retained earnings. It is noted that the one-time provision expense of $14.0 million to allowance for credit losses for non-PCD loans will be recorded as a provision expense in the income statement of the quarter ended September 30, 2024.

 

		Balance Sheet				Statements of Income
		3/31/2024				Three Months Ended 3/31/2024				Twelve Months Ended 12/31/2023
Allowance for credit losses
Reversal of existing allowance for credit losses		$	12,455			$	-			$	-
ACL for PCD Accruing loans			(1,811	)			-				-
Total adjustments to allowance for credit losses excluding ACL for Non-PCD Loans			10,644				-				-
ACL for Non-PCD loans			(13,956	)			-				-
Total adjustments to allowance for credit losses including ACL for Non-PCD Loans		$	(3,312	)		$	-			$	-

 

(6)

Balance sheet and statements of income adjustment to reflect the fair value of buildings and land for $893 thousand and the related amortization adjustment based on an expected life of 40 years. Balance sheet adjustment to reflect the write off of obsolete fixed assets of $300 thousand.

 

 

		Balance Sheet				Statements of Income
		3/31/2024				Three Months Ended 3/31/2024				Twelve Months Ended 12/31/2023
Premises and equipment
Owned premised fair value		$	893			$	6			$	23
Write off of obsolete fixed assets			(300	)
Total adjustments to premises		$	593			$	6			$	23

 

(7)

Balance sheet adjustment to reflect the net deferred tax asset, at a rate of 21.0%, related to fair value adjustments and tax benefits related to one-time merger charges and related statements of income adjustments to pro forma adjustments using an effective tax rate of 21.0% for book income tax expense.

 

		Balance Sheet				Statements of Income
		3/31/2024				Three Months Ended 3/31/2024				Twelve Months Ended 12/31/2023
Tax impact
Fair value adjustments		$	4,927			$	1,723			$	4,010
Peoples Financial Services, Inc. merger costs			2,607				-				-
ACL for Non-PCD loans			2,931				-				-
Reversal of merger related expenses			-				119				589
Total tax impact		$	10,465			$	1,842			$	4,599

 

(8)

Balance sheet adjustment to intangible assets to reflect the fair value of $36.6 million for acquired core deposit intangible assets and the fair value of wealth management customer list intangible of $988 thousand and the related statements of income amortization adjustments based upon an expected life of 10 years using sum of the years digits method.

 

		Balance Sheet				Statements of Income
		3/31/2024				Three Months Ended 3/31/2024				Twelve Months Ended 12/31/2023
Intangible assets
Core deposit intangible asset		$	36,629			$	1,665			$	6,660
Wealth Management customer list intangible			988				45				179
Total core deposit intangible asset		$	37,617			$	1,710			$	6,839

 

(9)

Balance sheet and income statement adjustment to reflect the write off of prepaid expenses.

 

		Balance Sheet				Statements of Income
		3/31/2024				Three Months Ended 3/31/2024				Twelve Months Ended 12/31/2023
Other assets
Write off of miscellaneous assets (primarily prepaid expenses and fair value adjustments for other miscellaneous assets)		$	(1,599	)		$	-			$	-
Total adjustments to other assets		$	(1,599	)		$	-			$	-

 

(10)

Balance sheet and statements of income adjustment related to the fair value of interest-bearing time deposits and corresponding statements of income adjustments related to the amortization of discount on interest-bearing time deposits based on the maturities of the interest-bearing time deposits.

 

 

		Balance Sheet				Statements of Income
		3/31/2024				Three Months Ended 3/31/2024				Twelve Months Ended 12/31/2023
Certificates of deposit
Certificates of deposit		$	(2,405	)		$	834			$	1,856
Total certificates of deposits		$	(2,405	)		$	834			$	1,856

 

(11)

Balance sheet and statements of income adjustment related to the fair value of borrowings and corresponding statements of income adjustments related to the amortization of discount on borrowings based on the maturities of the borrowings.

 

		Balance Sheet				Statements of Income
		3/31/2024				Three Months Ended 3/31/2024				Twelve Months Ended 12/31/2023
Borrowings
Borrowings fair value		$	(851	)		$	109			$	409
Total borrowings		$	(851	)		$	109			$	409

 

(12)

Balance sheet and statements of income adjustment related to the fair value of trust preferred debt and corresponding statements of income adjustments related to the amortization of discount on trust preferred debt based on the maturities of the subordinated debt.

 

		Balance Sheet				Statements of Income
		3/31/2024				Three Months Ended 3/31/2024				Twelve Months Ended 12/31/2023
Trust preferred
Trust preferred fair value		$	(2,318	)		$	23			$	96
Total trust preferred		$	(2,318	)		$	23			$	96

 

(13)	Balance sheet adjustment to reflect the accrual of one-time merger-related charges for Peoples and FNCB: (a) FNCB pre-tax charges are estimated at $2.2 million ($1.9 million after-tax) and are included as a pro forma fair value liability accrual, and (b) Peoples pre-tax charges are estimated at $13.3 million ($10.7 million after-tax) and are included as a pro forma liability accrual with the after-tax cost as reduction to retained earnings. It is noted that a tax benefit was not taken for certain merger obligations and costs that were not considered to be tax deductible. The pro forma statements of income do not include merger-related expenses related to this transaction which will be expensed against income when incurred. It is noted that the Peoples one-time merger expense will be recorded as a provision expense in the income statement of the quarter ended September 30, 2024. Additionally note that an adjustment to the statements of income was made to exclude a one-time merger and system related expenses that were incurred in March 31, 2024, and December 31, 2023 for both Peoples and FNCB. For the three months ended March 31, 2024, Peoples expenses were $486 thousand pre-tax or $427 thousand after tax and FNCB were $284 thousand pre-tax and $224 thousand after tax. For the twelve months ended December 31, 2023, Peoples expenses were $1.8 million pre-tax or $1.5 million after tax and FNCB were $1.5 million pre-tax and $1.2 million after tax.
	An additional fair value adjustment was made to increase the allowance for unfunded commitments.

 

 

 

		Balance Sheet				Statements of Income
		3/31/2024				Three Months Ended 3/31/2024				Twelve Months Ended 12/31/2023
Other Liabilities
Peoples accrual for one-time merger related charges		$	13,317			$	-			$	-
FNCB accrual for one-time merger related charges			2,184				-				-
Adjustment for reserve for unfunded commitments			301
Total other liabilities adjustments		$	15,802			$	-			$	-

 

MANAGEMENT ADJUSTMENTS:

 

(14)

Balance sheet and income statement adjustment to reflect the post-closing balance sheet restructuring of selling $241.5 million of investment securities available for sale with a yield of 5.01% and pay down $106.8 million of FHLB short term borrowings with a cost of 5.67%, with the remaining cash balance being invested in federal funds sold with a yield of 5.40%. The adjustment also includes a book income tax expense assuming a 21% tax rate.

 

		Balance Sheet				Statements of Income
		3/31/2024				Three Months Ended 3/31/2024				Twelve Months Ended 12/31/2023
Management Adjustments
Federal funds sold		$	134,688			$	1,818			$	7,273
Sale of investment securities		$	(241,488	)		$	(3,027	)		$	(12,107	)
Borrowings		$	(106,800	)		$	(1,515	)		$	(6,060	)
Income tax expense		$	-			$	64			$	257

 

 

v3.24.3

Cover	Jul. 01, 2024
Cover [Abstract]
Document Type	8-K/A
Amendment Flag	false
Document Period End Date	Jul. 01, 2024
Entity File Number	001-36388
Entity Registrant Name	PEOPLES FINANCIAL SERVICES CORP.
Entity Central Index Key	0001056943
Entity Tax Identification Number	23-2391852
Entity Incorporation, State or Country Code	PA
Entity Address, Address Line One	150 North Washington Avenue
Entity Address, City or Town	Scranton
Entity Address, State or Province	PA
Entity Address, Postal Zip Code	18503-1848
City Area Code	570
Local Phone Number	346-7741
Written Communications	false
Soliciting Material	false
Pre-commencement Tender Offer	false
Pre-commencement Issuer Tender Offer	false
Title of 12(b) Security	Common Stock, $2.00 par value
Trading Symbol	PFIS
Security Exchange Name	NASDAQ
Entity Emerging Growth Company	false

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