First National Community Bancorp, Inc. Reports First Quarter 2016 Net Income

DUNMORE, Pa., April 29, 2016 (GLOBE NEWSWIRE) -- First National Community Bancorp, Inc. (OTCQX:FNCB), the parent company of Dunmore-based First National Community Bank (the “Bank”), announced operating results for the quarter ended March 31, 2016. FNCB reported net income of $1.1 million, or $0.07 per basic and diluted share. Net income for the comparable period of 2015 was $3.5 million, or $0.21 per basic and diluted share. The $2.4 million decrease in first quarter earnings reflected lower non-interest income, a provision for loan and lease losses in 2016 versus a credit for loan and lease losses in 2015, partially offset by an increase in net interest income. Annualized return on average assets and return on average equity were 0.42% and 5.15%, respectively, for the three months ended March 31, 2016, compared to 1.45% and 26.34%, respectively, for the same three months of 2015. FNCB paid holders of its common stock a dividend of $0.02 per share for the first quarter of 2016. FNCB did not pay a dividend for the first quarter of 2015.

Performance Highlights:

• Paid a dividend of $0.02 per share in the first quarter of 2016, the first quarterly dividend payment since the fourth quarter of 2009;
• Year over year growth of $1.3 million, or 20.0%, in net interest income;
• 26 basis point improvement in tax-equivalent net interest margin in the first quarter of 2016 compared to same quarter of 2015;
• Year over year growth of 9.4% in average earning assets; and
• Paid $10.8 million in deferred and accrued interest on subordinated debt.

“We are pleased with FNCB’s first quarter results, which reflected normalized core earnings growth, net interest margin improvement and strong earning asset growth,” stated Steven R. Tokach, President and Chief Executive Officer. “In addition, we were successful in achieving two significant goals during the first quarter. We were able to make our subordinated noteholders whole as to deferred interest, which significantly improved our leverage position, and provide a return to our loyal shareholders through the payment of a first quarter dividend.  We sincerely appreciate the ongoing trust and support of these stakeholders,” concluded Mr. Tokach.

Summary Results for the Three Months Ended March 31, 2016

Net interest income before the provision for loan and lease losses was $7.5 million for the first three months of 2016, an increase of $1.3 million, or 20.0%, compared to $6.3 million for the same period in 2015. Tax-equivalent interest income increased $0.8 million, or 10.7%, to $8.7 million for the three-month period ended March 31, 2016 compared to $7.9 million in 2015. The increase primarily reflected an $84.9 million, or 9.4%, increase in average earning assets. Specifically, average loans grew $56.8 million, or 8.4%, comparing the first quarters of 2016 and 2015, while average investment securities increased $59.1 million, or 29.8%.  Also positively impacting net interest income was a 27 basis point decrease in the cost of funds to 0.48% for the first three months of 2016 from 0.75% for the same three months of 2015, which was the primary factor leading to a $0.4 million reduction in interest expense. Causing the greatest impact in funding costs was a 168 basis point decrease in the cost of borrowed funds, which resulted from a modification of the interest rate on FNCB’s subordinated notes from 9.00% to 4.50% mid-2015. Partially offsetting the impact of the reduction in funding costs was an $81.5 million, or 10.8%, increase in average interest-bearing liabilities. The tax-equivalent net interest margin for the three months ended March 31, 2016 was 3.11%, an improvement of 26 basis points from 2.85% for the same period in 2015.

For the three months ended March 31, 2016 non-interest income totaled $1.3 million, a decrease of $2.1 million, or 61.1%, compared to $3.4 million for the same three months of 2015. The change resulted primarily from a decrease in net gains on the sale of securities of $2.1 million to $103 thousand in 2016 from $2.2 million in 2015.  In addition, FNCB experienced a decrease of $40 thousand in other income, and a net loss of $5 thousand on the sale of OREO compared to a net gain of $5 thousand in 2015.  Partially offsetting these decreases were increases in net gains on the sale of mortgage loans of $28 thousand, service charges on deposits of $27 thousand, loan-related fees of $17 thousand and income from bank-owned life insurance of $11 thousand.

Non-interest expense remained relatively flat comparing the three months ended March 31, 2016 and 2015, increasing by $22 thousand, or 0.3%.  The increases were primarily a rise in salaries and benefits expense of $375 thousand, or 11.94%, along with a $74 thousand increase in data processing expenses and a $39 thousand increase in equipment expense.  The increase in salaries and benefits expense resulted from additions to staff, coupled with a 30.8% increase in health insurance costs. The recent conversion to a new core operating system in the fourth quarter of 2015 and other planned improvements to FNCB’s technology infrastructure caused the increase in data processing expense and equipment expense, specifically maintenance contract costs and depreciation. These increases were mostly offset by decreases in regulatory assessments of $172 thousand, or 42.0%, occupancy expenses of $140 thousand, insurance expenses of $70 thousand, expenses of other real estate owned of $54 thousand, and legal expenses of $43 thousand.

Improved Asset Quality

FNCB’s asset quality continued to improve through March 31, 2016, a result of the effective management of problem credits and delinquent loans. Total non-performing loans decreased $219 thousand, or 5.8%, to $3.6 million at March 31, 2016 from December 31, 2015. The ratio of non-performing loans to total loans improved 3 basis points to 0.49% at March 31, 2016, compared to 0.52% at December 31, 2015. The allowance for loan and lease losses as a percentage of gross loans was 1.19% at March 31, 2016 versus 1.20% at the end of 2015. FNCB’s ratio of total delinquent loans to total loans at March 31, 2016 was 0.82%, a 2 basis point improvement from 0.84% at December 31, 2015.  Each of these asset quality metrics compare favorably to industry peer.

Financial Condition

FNCB’s total assets were relatively stable, decreasing $5.6 million, or 0.5%, to $1.085 billion at March 31, 2016 from $1.091 billion at December 31, 2015. The balance sheet change primarily reflected reductions of $5.4 million in loans, net of the ALLL, $2.4 million in FHLB of Pittsburgh stock, $1.3 million in OREO and $2.9 million in cash and cash equivalents, which were mostly offset by an increase in available-for-sale securities of $9.8 million. Total deposits grew $61.6 million, or 7.5%, due primarily to the attainment of a new municipal deposit relationship, along with an influx of public deposits related to the release of state government funds in early 2016 as a result of the state budget impasse. The deposit growth was used to repay borrowings from the FHLB of Pittsburgh, which declined $61.3 million, or 45.1%, when comparing March 31, 2016 and December 31, 2015.  In addition, FNCB repaid all accrued interest totaling $10.8 million that had been deferred on the subordinated notes for the period September 1, 2010 through May 31, 2015. 

Total shareholders’ equity increased $5.9 million, or 6.8%, to $92.0 million at March 31, 2016 from $86.2 million at December 31, 2015. The capital improvement resulted primarily from a $5.0 million increase in accumulated other comprehensive income from the appreciation in the fair value of available-for-sale securities, net of tax effects, coupled with net income of $1.1 million for the first quarter of 2015.  Partially offsetting these increases was $0.3 million in dividends paid to common shareholders.

Availability of Filings

Copies of FNCB’s most recent Annual Report on Form 10-K and Quarterly Report on form 10-Q will be provided upon request from: Shareholder Relations, First National Community Bancorp, Inc., 102 East Drinker Street, Dunmore, PA 18512 or by calling (570) 348-6419. All of FNCB’s filings with the Securities and Exchange Commission are also available on the Investor Relations page of FNCB’s website, www.fncb.com/investorrelations.

About First National Community Bank:
First National Community Bancorp, Inc. is the bank holding company of First National Community Bank, which provides personal, small business and commercial banking services to individuals and businesses throughout Lackawanna, Luzerne, and Wayne Counties in Northeastern Pennsylvania.  The institution was established as a National Banking Association in 1910 as The First National Bank of Dunmore, and has been operating under its current name since 1988. For more information about FNCB, visit www.fncb.com.

FNCB may from time to time make written or oral “forward-looking statements,” including statements contained in our filings with the Securities and Exchange Commission (“SEC”), in its reports to shareholders, and in other communications, which are made in good faith by us pursuant to the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995.

These forward-looking statements include statements with respect to FNCB’s beliefs, plans, objectives, goals, expectations, anticipations, estimates and intentions, that are subject to significant risks and uncertainties, and are subject to change based on various factors (some of which are beyond our control).  The words “may,” “could,” “should,” “would,” “believe,” “anticipate,” “estimate,” “expect,” “intend,” “plan” and similar expressions are intended to identify forward-looking statements.  The following factors, among others, could cause FNCB’s financial performance to differ materially from the plans, objectives, expectations, estimates and intentions expressed in such forward-looking statements: the strength of the United States economy in general and the strength of the local economies in our markets; the effects of, and changes in trade, monetary and fiscal policies and laws, including interest rate policies of the Board of Governors of the Federal Reserve System; inflation, interest rate, market and monetary fluctuations; the timely development of and acceptance of new products and services; the ability of FNCB to compete with other institutions for business; the composition and concentrations of FNCB’s lending risk and the adequacy of FNCB’s reserves to manage those risks; the valuation of FNCB’s investment securities; the ability of FNCB to pay dividends or repurchase common shares; the ability of FNCB to retain key personnel; the impact of any pending or threatened litigation against FNCB; the marketability of shares of FNCB and fluctuations in the value of FNCB’s share price; the effectiveness of FNCB’s system of internal controls; the ability of FNCB to attract additional capital investment; the impact of changes in financial services’ laws and regulations (including laws concerning capital adequacy, taxes, banking, securities and insurance); the impact of technological changes and security risks upon our information technology systems; changes in consumer spending and saving habits; the nature, extent, and timing of governmental actions and reforms, and the success of FNCB at managing the risks involved in the foregoing and other risks and uncertainties, including those detailed in FNCB’s filings with the SEC.

FNCB cautions that the foregoing list of important factors is not all inclusive.  Readers are also cautioned not to place undue reliance on any forward-looking statements, which reflect management’s analysis only as of the date of this report, even if subsequently made available by FNCB on its website or otherwise.  FNCB does not undertake to update any forward-looking statement, whether written or oral, that may be made from time to time by or on behalf of FNCB to reflect events or circumstances occurring after the date of this report.

Readers should carefully review the risk factors described in the Annual Report and other documents that FNCB periodically files with the Securities and Exchange Commission, including its Form 10-K for the year ended December 31, 2015.

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