FNCB Bancorp, Inc. Announces Increase in Second Quarter and Year-to-date 2019 Earnings

DUNMORE, Pa., July 22, 2019 (GLOBE NEWSWIRE) -- FNCB Bancorp, Inc. (NASDAQ: FNCB), the parent company of Dunmore-based FNCB Bank (the “Bank”), today reported net income of $2.549 million, or $0.13 per basic and diluted share, for the three months ended June 30, 2019, an increase of $137 thousand, or 5.7%, compared to net income of $2.412 million, or $0.14 per basic and diluted share, for the three months ended June 30, 2018. Net income for the six months ended June 30, 2019 was $5.184 million, or $0.27 per basic and diluted share, an increase of $753 thousand, or 17.0%, from $4.431 million for the same six months of 2018. The increase in second quarter and year-to-date earnings primarily reflected a reduction in the provision loan and lease losses, coupled with an increase in non-interest income. Partially offsetting these positive factors was a decrease in net interest income and an increase in non-interest expense.

For the three months and six months ended June 30, 2019, the annualized return on average assets was 0.85% and 0.86%, respectively, and 0.79% and 0.75%, respectively, for the same periods of 2018. The annualized return on average equity was 8.19% and 8.89%, respectively, for the three- and six-month periods ended June 30, 2019, and 11.23% and 10.34%, respectively, for the comparable periods of 2018. Dividends declared and paid were $0.05 per share for the second quarter and $0.10 per share for the year-to-date period of 2019, a 25.0% increase compared to $0.04 per share and $0.08 per share, respectively, for the three and six months ended June 30, 2018. The dividend pay-out ratio for the six months ended June 30, 2019, was 38.8%, compared to 30.3% for the comparable period of 2018.

Second Quarter 2019 Highlights:

• Opened a new community banking office in Mountain Top, Luzerne County, Pennsylvania;

• Completed the relocation of our main office into a new state-of-the-art facility in Dunmore, Lackawanna County, Pennsylvania;

• Tax-equivalent net interest margin improved 11 basis points on a linked quarter basis to 3.25% for the second quarter of 2019, compared to 3.14% for the first quarter of 2019;

• Year-to-date 2019 dividend payout ratio of 38.8%; and

• FNCB Bancorp, Inc. added as a member of the Russell 3000® Index as part of FTSE Russell reconstitution after market close on June 28, 2019.

"The second quarter of 2019 was another profitable quarter for FNCB. Through effective asset/liability management we were able to stabilize funding costs and improve our net interest margin over the prior quarter, as well as improve operating efficiency within our franchise," stated Gerard A. Champi, President and Chief Executive Officer. "At the end of the second quarter of 2019, we were pleased to announce the opening of our newest and seventeenth full-service, banking office in Mountain Top, Pennsylvania and we are excited to be part of, and serve the people and businesses in, the Mountain Top community. Additionally, at the end of the second quarter, we completed the relocation of our main office to a brand new, state-of-the-art facility. Both locations feature an open, relaxed, cafe-like atmosphere designed to enhance our customer's in-branch banking experience," continued Champi. "For the remainder of 2019, we are focused on enhancements to our mobile-banking platforms, as well as furthering core deposit relationships within the personal and business sectors," Champi concluded.

Summary Results

For the three months ended June 30, 2019, tax-equivalent net interest income decreased $0.3 million, or 3.2% to $9.1 million from $9.4 million for the same three months of 2018. Specifically, interest expense increased $0.5 million, or 25.6%, to $2.5 million for the second quarter of 2019 from $2.0 million for the same quarter of 2018. The increase in interest expense was partially mitigated by an increase in tax-equivalent interest income of $0.2 million, or 1.9%, comparing the second quarters of 2019 and 2018. The increase in second quarter interest expense resulted primarily from a 44-basis point increase in the cost of deposits, coupled with a $61.5 million, or 7.8%, increase in average interest-bearing deposits. The increase in the average balance and cost of interest-bearing deposits was partially offset by a $111.2 million, or 68.0%, reduction in average borrowed funds. Comparing the second quarter of 2019 and 2018, the increase in tax-equivalent interest income was largely caused by a 26-basis point increase in the tax-equivalent yield on loans, partially offset by a $14.3 million decrease in average loans. For the six months ended June 30, 2019, tax-equivalent net interest income decreased $0.2 million, or 1.1% to $18.1 million, from $18.3 million for the same six months of 2018. Similar to the quarter-to-date period, the decrease in year-to-date tax-equivalent net interest income reflected rising deposit costs and higher average balances of interest-bearing deposits, partially offset by a reduction in the average balance of borrowed funds. A 27-basis point increase in the tax-equivalent yield on loans, coupled with a moderate $18.7 million, or 2.2%, increase in average loans, also positively impacted net interest income levels comparing the year-to-date periods of 2019 and 2018. Despite the increase for the quarter and year-to-date periods, deposit costs have stabilized, increasing by 2 basis points on a linked quarter basis from the first quarter of 2019. Additionally, FNCB’s tax-equivalent net interest margin, which decreased consistently over the prior four quarters, increased 11 basis points to 3.25% for the second quarter of 2019 from 3.14% for the first quarter of 2019 and was comparable to the tax-equivalent net interest margin of 3.26% for the second quarter of 2018. For purposes of presenting net interest income, earning-asset yields and net interest margin information on a tax-equivalent basis, tax-free interest income is adjusted using the statutory federal corporate income tax rate of 21.0% for the three and six months ended June 30, 2019 and 2018.

Non-interest income increased moderately comparing the quarter and year-to-date periods of 2019 and 2018 due primarily to net gains on the sale of available-for-sale securities, partially offset by a reduction in deposit service charges. FNCB realized net gains on the sale of available-for-sale debt securities of $163 thousand and $323 thousand for the second quarter and year-to-date periods of 2019, respectively, compared to a net loss of $4 thousand for both respective periods of 2018. Deposit services charges decreased $26 thousand and $43 thousand comparing the three months and six months ended June 30, 2019 and 2018, respectively. FNCB implemented a tiered structure for NSF charges during the first quarter of 2019, which was the primary factor causing the reduction in deposit service charges.

For the three months ended June 30, 2019, non-interest expense increased by $156 thousand, or 2.2%, to $7.1 million from $7.0 million for the comparable three months of 2018. Non-interest expense for the six months ended June 30, 2019, increased $349 thousand, or 2.5%, to $14.5 million from $14.2 million for the same six months of 2018. The increase in the three- and six-month periods primarily reflected increases in salaries and employee benefits, data processing costs and bank shares tax, which were partially offset by reductions in occupancy expense, regulatory assessments and other operating expenses.

Asset Quality

Total non-performing loans decreased $0.9 million to $5.3 million, or 0.65% of total loans, at June 30, 2019 from $6.2 million, or 0.74%, of total loans at March 31, 2019. Additionally, FNCB’s loan delinquency rate (total delinquent loans as a percentage of total loans) improved to 0.99% at June 30, 2019 from 1.28% at March 31, 2019. The allowance for loan and lease losses was $8.9 million, or 1.10% of total outstanding loans, at June 30, 2019, compared to $9.3 million, or 1.10% of total loans outstanding, at March 31, 2019 and $9.5 million, or 1.13% of total loans outstanding, at December 31, 2018. Management actively manages problem credits through heightened workout efforts focused on developing strategies to resolve borrower difficulties through liquidation of collateral and other appropriate means. Net charge-offs were $655 thousand, or an annual rate of 0.32% of average loans, for the three months ended June 30, 2019 compared to $983 thousand, or an annual rate of 0.47% of average loans, for the same three months of 2018.

Financial Condition

The balance sheet contracted by $15.7 million, or 1.3%, to $1.199 billion at June 30, 2019, from $1.214 billion at March 31, 2019. The decrease in total assets primarily reflected a $24.5 million, or 2.9%, decrease in loans, net of deferred costs and unearned income, to $814.4 million at June 30, 2019 from $838.9 million at March 31, 2019, which primarily reflected the planned runoff of indirect automobile loan balances and the anticipated payoff of two large municipal loans, partially offset by growth in construction, land acquisition and development loans. The decrease in loans was partially offset by an $11.8 million, or 4.3% increase in available-for-sale securities to $285.9 million at June 30, 2019 from $274.1 million at March 31, 2019. Total deposits decreased $79.0 million, or 7.6%, to $961.1 million at June 30, 2019 from $1.040 billion at March 31, 2019, which largely reflected the cyclical deposit trends of municipal customers, coupled with a decrease in time deposits. Conversely, total borrowed funds increased $58.2 million to $97.5 million at June 30, 2019 from $39.3 million at March 31, 2019, which was entirely comprised of an increase in FHLB of Pittsburgh advances. Total assets decreased $38.9 million, or 3.1%, from $1.238 billion at December 31, 2018. Similar to the change for the quarter, the decrease from December 31, 2018 reflected a $24.7 million, or 2.9% decrease in loans, net of deferred costs and unearned income, partially offset by an increase of $10.1 million, or 3.4%, in available-for-sale securities. Total deposits decreased $134.5 million, or 12.3%, from $1.096 billion at December 31, 2018, while total borrowed funds increased $63.3 million, or 185.1%, from $34.2 million at December 31, 2018.

Total shareholders’ equity increased $32.5 million, or 33.4%, to $129.7 million at June 30, 2019 from $97.2 million at December 31, 2018. FNCB successfully completed a public offering of its common stock, which resulted in a net increase to capital after offering expenses of $21.3 million in the first quarter of 2019. Also factoring into the capital improvement was net income for the six months ended June 30, 2019 of $5.2 million and a $7.9 million positive change in other comprehensive income related entirely to appreciation in the fair value of available-for-sale debt securities, net of deferred taxes, partially offset by dividends declared of $2.0 million. FNCB’s total risk-based capital and Tier I leverage ratios improved to 15.71% and 11.02%, respectively, at June 30, 2019 from 12.69% and 8.50%, respectively, at December 31, 2018.

Availability of Filings

Copies of FNCB’s most recent Annual Report on Form 10-K and Quarterly Reports on form 10-Q will be provided upon request from: Shareholder Relations, FNCB Bancorp, Inc., 102 East Drinker Street, Dunmore, PA 18512 or by calling (570) 348-6419. FNCB’s SEC filings including its Annual Report on Form 10-K and Quarterly Reports on Form 10-Q are also available free of charge on the Investor Relations page of the FNCB’s website, www.fncb.com, and on the SEC website at: http://www.sec.gov/edgar/searchedgar/companysearch.html

About FNCB Bancorp, Inc.:
FNCB Bancorp, Inc. is the bank holding company of FNCB Bank. Locally-based for over 100 years, FNCB Bank continues as a premier community bank in Northeastern Pennsylvania – offering a full suite of personal, small business and commercial banking solutions with industry-leading mobile, online and in-branch products and services. FNCB currently operates through 17 community offices located in Lackawanna, Luzerne and Wayne Counties and a limited purpose office in Lehigh County, and remains dedicated to making its customers’ banking experience simply better. For more information about FNCB, visit www.fncb.com.

INVESTOR CONTACT:
James M. Bone, Jr., CPA
Executive Vice President and Chief Financial Officer
FNCB Bank
(570) 348-6419
james.bone@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, fiscal and tax 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, including for deposit and loan growth: 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 stock 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 ability of FNCB to identify future acquisition targets, complete acquisitions and integrate new teams into FNCB’s operations; 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, 2018.