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FNCB Bancorp, Inc. Reports Increase in 2018 Earnings

DUNMORE, Pa., Jan. 25, 2019 (GLOBE NEWSWIRE) -- FNCB Bancorp, Inc. (FNCB), the parent company of Dunmore-based FNCB Bank (the “Bank”), today reported net income of $13.3 million, or $0.79 per basic and diluted share, for 2018, compared to net income of $0.1 million, or $0.01 per basic and diluted share, for 2017. For the fourth quarter of 2018, FNCB recorded net income of $7.1 million, or $0.42 per basic and diluted share, compared to a net loss of $6.1 million, or $0.36 per basic and diluted share for the respective quarter of 2017. The increase in earnings for the fourth quarter and year-to-date periods were due largely to a decrease in income tax expense, coupled with increases in net interest income and non-interest income. Income tax expense decreased $7.0 million and $8.2 million comparing the three months and year ended December 31, 2018 and 2017, respectively. During the fourth quarter of 2017, FNCB had recognized additional, non-recurring income tax expense of $8.0 million resulting from the revaluation of FNCB’s net deferred tax assets following the enactment of the Tax Cuts and Jobs Act (the “Act”) on December 22, 2017. With regard to non-interest revenue, in the fourth quarter of 2018, FNCB, the Bank and Fidelity Deposit Company of Maryland resolved a dispute by entering into a mutual release of all claims, which resulted in FNCB recognizing an insurance recovery after related expenses of $6.0 million. Partially offsetting these positive factors for the year ended December 31, 2018 were increases in the provision for loan and lease losses and non-interest expense.

Return on average assets and return on average shareholders’ equity were 1.09% and 15.38%, respectively, in 2018, compared to 0.01% and 0.15%, respectively in 2017. For the three months ended December 31, 2018, return on average assets and return on average shareholders’ equity were 2.26% and 32.26%, respectively. Comparatively, return on average assets was (2.09%) and return on average shareholders’ equity was (24.98%) for the three months ended December 31, 2017.

2018 Performance Highlights:

  • Year-to-date total revenue (net interest income and non-interest income) increased $8.0 million, or 19.9% year over year;
  • Net interest income (FTE) increased 3.3% and 9.6%, comparing the quarter and year ended December 31 of 2018 and 2017, respectively;
  • Efficiency ratio for the fourth quarter improved to 47.59% in 2018 from 73.42% in 2017;
  • Yield on earning assets (FTE) for the fourth quarter of 2018 improved 22 basis points compared to the same quarter of 2017;
  • Year over year growth in total loans, net of net deferred costs and unearned income, of $68.5 million, or 8.9%;
  • Total deposits grew $93.2 million, or 9.3%, comparing December 31, 2018 and 2017; and
  • Total capital increased $8.0 million, or 9.0%, comparing December 31, 2018 and 2017.

“We are very pleased with our 2018 operating performance,” stated Gerard A. Champi, President and Chief Executive Officer. “The solid results reflected the ongoing efforts of the entire FNCB team focused on organic loan and core deposit growth, funding cost management and controlling non-interest expense. We experienced strong demand for loans and deposits and were able to grow interest revenue and maintain our net interest margin in 2018 amid what proved to be a very challenging interest rate environment and competitive marketplace,” continued Champi. “We realize we still have much work to do ahead but are encouraged as we enter into 2019. We believe our strong balance sheet leaves us well positioned to advance our performance into the new year and continue to create long-term value for our shareholders,” concluded Champi.

Cash Dividends Declared

Dividends declared and paid were $0.05 per share for the fourth quarter and $0.17 per share for the year-to-date period of 2018, which represented increases of 25.0% and 30.8% compared to $0.04 per share and $0.13 per share, respectively, for the fourth quarter and year-to-date periods ended December 31, 2017. Total dividends declared and paid for 2018 equated to a dividend yield of approximately 2.01% based on the closing stock price of $8.44 per share at December 31, 2018.

Summary Results for 2018

For the three months ended December 31, 2018, tax-equivalent net interest income increased $0.3 million, or 3.3% to $9.3 million from $9.0 million for the same three months of 2017. Despite the increase in net interest income, FNCB’s tax-equivalent net interest margin for the fourth quarter of 2018 contracted 18 basis points to 3.17% compared to 3.35% for the same quarter of 2017. The margin contraction primarily reflected a 45 basis-point increase in the cost of funds to 1.04% for the three months ended December 31, 2018 from 0.59% for the same three months of 2017. For the year ended December 31, 2018, tax-equivalent net interest income increased $3.2 million, or 9.6%, to $37.0 million compared to $33.7 million for the year ended December 31, 2017. The improvement in net interest income for the year-to-date period was largely due to growth in average earning assets and higher earning-asset yields, partially offset by higher funding costs. Average earning assets grew $100.7 million, or 9.6%, to $1.147 billion in 2018 from $1.046 billion in 2017. Tax-equivalent earning-asset yields improved 29 basis points to 3.97% in 2018 compared to 3.68% in 2017. For the year ended December 31, 2018, the cost of funds increased 35 basis points to 0.90% from 0.55% for the year ended December 31, 2017. The tax-equivalent net interest margin decreased 1 basis point to 3.22% in 2018 from 3.23% in 2017.  The net interest margin for the fourth quarter of 2018 decreased 4 basis points to 3.17% from 3.21% for the third 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 2018 and 34.0% for 2017.

For the quarter ended December 31, 2018, non-interest income amounted to $7.4 million, an increase of $5.5 million, or 287.0%, compared to $1.9 million for the same period of 2017. Non-interest income totaled $11.8 million for the year ended December 31, 2018, an increase of $4.6 million, or 63.2%, compared to $7.2 million for the year ended December 31, 2017. The increase in non-interest income for the fourth quarter and year-to-date periods was primarily due to the insurance recovery, net of related expenses, of $6.0 million received in the fourth quarter of 2018. Included in non-interest income for the three months and year ended December 31, 2017 were net gains on the sale of available-for sale securities of $0.3 million and $1.6 million, respectively. Comparatively, there were no net gains on the sale of available-for-sale securities for the three months ended December 31, 2018. For the year ended December 31, 2018, FNCB realized net losses on the sale of available-for-sale securities of $4 thousand.

For the three months ended December 31, 2018, non-interest expense increased by $0.1 million, or 1.8%, to $7.9 million from $7.8 million for the comparable three months of 2017. Non-interest expense for all of 2018 totaled $29.3 million, an increase of $1.2 million, or 4.5%, from $28.1 million for 2017. The increase in non-interest expense resulted largely from higher salaries and employee benefits expense related to staffing additions within FNCB Bank’s retail and commercial lending and credit administration units, coupled with increases in regulatory assessments, which, we believe, primarily reflected strong balance sheet growth.

Asset Quality

Total non-performing loans increased $2.1 million to $4.7 million, or 0.56% of total loans, at December 31, 2018, from $2.6 million, or 0.34% of total loans at December 31, 2017. FNCB’s loan delinquency rate (total delinquent loans as a percentage of total loans) was 0.93% at December 31, 2018 compared to 0.72% at the end of 2017. The increase in non-performing loans and loan delinquencies was primarily attributable to two commercial relationships that were placed on non-accrual status during 2018. The allowance for loan and lease losses as a percentage of gross loans was 1.13% and 1.17% at December 31, 2018 and 2017, respectively.

Financial Condition

Total assets increased $75.4 million, or 6.5%, to $1.238 billion at December 31, 2018 from $1.162 billion at December 31, 2017. The increase in total assets primarily reflected strong growth in interest-earning assets. Specifically, loans, net of net deferred costs and unearned income, increased $68.5 million, or 8.9%, to $839.1 million at December 31, 2018 from $770.6 million at December 31, 2017. Available-for-sale securities increased $6.5 million to $296.0 million at December 31, 2018 from $289.5 million at December 31, 2017. The asset growth was funded with an increase in total deposits of $93.2 million, or 9.3%, to $1.096 billion at December 31, 2018 from $1.002 billion at December 31, 2017. The increase in deposits was primarily attributable to increases in retail and wholesale time deposits. Borrowings through the Federal Home Loan Bank of Pittsburgh decreased $26.0 million to $18.9 million at December 31, 2018 from $44.9 million at December 31, 2017.

Total shareholders’ equity increased $8.0 million, or 9.0%, to $97.2 million at December 31, 2018 from $89.2 million at December 31, 2017. The capital increase resulted primarily from net income in 2018 of $13.3 million, partially offset by a $2.8 million increase in accumulated other comprehensive loss related to depreciation in the fair value of available-for-sale debt securities, net of deferred taxes, and year-to-date dividends declared of $2.9 million. FNCB’s total risk-based capital and Tier I leverage ratios improved to 12.69% and 8.50%, respectively, at December 31, 2018 from $12.08% and 7.74%, respectively, at December 31, 2017. 

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 operates through 16 branch offices located in Lackawanna, Luzerne and Wayne Counties and a limited purpose office in Lehigh County, and remains dedicated to making our 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, 2017.

[FNCB provides tabular information as follows]

FNCB Bancorp, Inc.  
Selected Financial Data  
                         
         
      Dec 31,   Sept 30,   Jun 30,   Mar 31,   Dec 31,  
        2018       2018       2018       2018     2017  
Per share data:                      
Net income (loss) (fully diluted)   $   0.42     $   0.11     $   0.14     $   0.12     $   (0.36 )  
Cash dividends declared   $   0.05     $   0.04     $   0.04     $   0.04     $   0.04    
Book value   $   5.78     $   5.15     $   5.18     $   5.17     $   5.32    
Tangible book value   $   5.78     $   5.15     $   5.18     $   5.17     $   5.32    
Market value:                      
  High    $   10.39     $   12.00     $   10.00     $   9.98     $   7.99    
  Low   $   8.21     $   7.97     $   8.01     $   7.01     $   6.54    
  Close   $   8.44     $   9.77     $   8.88     $   9.24     $   7.30    
Common shares outstanding       16,821,371         16,819,471         16,817,097         16,766,600         16,757,963    
                         
Selected ratios:                      
Annualized return on average assets     2.26 %     0.59 %     0.79 %     0.70 %     (2.09 %)  
Annualized return on average shareholders' equity     32.26 %     8.41 %     11.23 %     9.44 %     (24.98 %)  
Efficiency ratio     47.59 %     67.11 %     63.94 %     68.78 %     73.42 %  
Tier I leverage ratio     8.50 %     7.66 %     7.69 %     7.80 %     7.74 %  
Total risk-based capital to risk-adjusted assets     12.69 %     11.42 %     11.31 %     11.70 %     12.08 %  
Average shareholders' equity to average total assets     7.00 %     7.00 %     7.05 %     7.38 %     8.35 %  
Yield on earning assets (FTE)     4.06 %     4.04 %     3.96 %     3.83 %     3.84 %  
Cost of funds     1.04 %     1.00 %     0.84 %     0.69 %     0.59 %  
Net interest spread (FTE)     3.02 %     3.04 %     3.12 %     3.15 %     3.25 %  
Net interest margin (FTE)     3.17 %     3.21 %     3.26 %     3.26 %     3.35 %  
Total delinquent loans/total loans     0.93 %     0.90 %     0.71 %     0.73 %     0.72 %  
Allowance for loan and lease losses/total loans     1.13 %     1.14 %     1.11 %     1.18 %     1.17 %  
Non-performing loans/total loans     0.56 %     0.51 %     0.41 %     0.30 %     0.34 %  
Annualized net charge-offs/average loans     0.05 %     0.36 %     0.47 %     0.10 %     0.06 %  
                         

 

FNCB Bancorp, Inc.  
Year-to-Date Consolidated Statements of Income  
  Year Ended  
  December 31,  
(in thousands, except share data)     2018       2017  
Interest income          
Interest and fees on loans   $   36,381     $   29,821  
Interest and dividends on securities          
  U.S. government agencies       3,565         3,426  
  State and political subdivisions, tax-free       133         49  
  State and political subdivisions, taxable       4,105         3,809  
  Other securities       813         563  
    Total interest and dividends on securities       8,616         7,847  
Interest on interest-bearing deposits in other banks       88         180  
      Total interest income       45,085         37,848  
Interest expense          
Interest on deposits       5,925         3,521  
Interest on borrowed funds          
  Interest on Federal Home Loan Bank of Pittsburgh advances       2,025         599  
  Interest on subordinated debentures       228         380  
  Interest on junior subordinated debentures        400         300  
    Total interest on borrowed funds       2,653         1,279  
      Total interest expense       8,578         4,800  
Net interest income before provision for loan and lease losses       36,507         33,048  
Provision for loan and lease losses       2,550         769  
Net interest income after provision for loan and lease losses       33,957         32,279  
Non-interest income          
Deposit service charges       2,885         2,903  
Net (loss) gain on the sale of securities       (4 )       1,597  
Net loss on equity securities       (27 )       -  
Net gain on the sale of mortgage loans held for sale       210         304  
Net gain on the sale of SBA guaranteed loans       322         79  
Net gain on the sale of other repossessed assets       -         47  
Net gain on the sale of other real estate owned       31         79  
Loan-related fees       390         384  
Income from bank-owned life insurance       555         527  
Insurance recovery       6,027         -  
Other           1,401         1,305  
      Total non-interest income       11,790         7,225  
Non-interest expense          
Salaries and employee benefits       14,780         14,161  
Occupancy expense       2,191         2,105  
Equipment expense       1,254         1,815  
Data processing expense       2,799         2,023  
Regulatory assessments       861         686  
Bank shares tax       636         800  
Professional fees       1,028         956  
Insurance expense       515         519  
Other operating expenses       5,263         5,004  
      Total non-interest expense       29,327         28,069  
Income before income taxes       16,420         11,435  
Income tax expense       3,071         11,288  
Net income     $   13,349     $   147  
                 
Income per share          
  Basic     $   0.79     $   0.01  
  Diluted     $   0.79     $   0.01  
                 
Cash dividends declared per common  share    $   0.17     $   0.13  
Weighted average number of shares outstanding:          
  Basic       16,799,004       16,722,966  
  Diluted       16,820,753       16,740,288  
 

 

FNCB Bancorp, Inc.  
Quarter-to-Date Consolidated Statements of Income (Loss)  
                             
  Three Months Ended  
  Dec 31,   Sept 30,   Jun 30,   Mar 31,   Dec 31,  
(in thousands, except share data)     2018       2018       2018       2018       2017    
Interest income                      
Interest and fees on loans   $   9,561     $   9,501     $   9,031     $   8,288     $   8,073    
Interest and dividends on securities                      
  U.S. government agencies       890         899         886         890         860    
  State and political subdivisions, tax-free       38         37         38         20         7    
  State and political subdivisions, taxable       1,026         1,028         1,027         1,024         993    
  Other securities       167         211         240         195         154    
    Total interest and dividends on securities       2,121         2,175         2,191         2,129         2,014    
Interest on interest-bearing deposits in other banks       36         17         12         23         34    
      Total interest income       11,718         11,693         11,234         10,440         10,121    
Interest expense                      
Interest on deposits       2,165         1,559         1,134         1,067         1,008    
Interest on borrowed funds                      
  Interest on Federal Home Loan Bank of Pittsburgh advances       251         715         707         352         175    
  Interest on subordinated debentures       57         58         57         56         57    
  Interest on junior subordinated debentures        108         106         99         87         81    
    Total interest on borrowed funds       416         879         863         495         313    
      Total interest expense       2,581         2,438         1,997         1,562         1,321    
Net interest income before (credit) provision for loan and lease losses       9,137         9,255         9,237         8,878         8,800    
(Credit) provision for loan and lease losses       (199 )       1,149         880         720         283    
Net interest income after (credit) provision for loan and lease losses       9,336         8,106         8,357         8,158         8,517    
Non-interest income                      
Deposit service charges       725         711         747         702         756    
Net (loss) gain on the sale of securities       -         -         (4 )       -         259    
Net gain (loss) on equity securities       7         (8 )       (7 )       (19 )       -    
Net gain on the sale of mortgage loans held for sale       39         71         51         49         63    
Net gain on the sale of SBA guaranteed loans       -         -         71         251         -    
Net (loss) gain on the sale of other real estate owned       -         -         (7 )       38         22    
Loan-related fees       145         85         76         84         132    
Income from bank-owned life insurance       142         141         138         134         128    
Insurance recovery       6,027         -         -         -         -    
Other           337         320         464         280         558    
      Total non-interest income       7,422         1,320         1,529         1,519         1,918    
Non-interest expense                      
Salaries and employee benefits       4,048         3,581         3,485         3,666         4,092    
Occupancy expense       562         500         526         603         538    
Equipment expense       318         299         323         314         435    
Data processing expense       759         745         647         648         521    
Regulatory assessments       213         251         196         201         189    
Bank shares tax       (131 )       278         222         267         38    
Professional fees       295         241         196         296         294    
Insurance expense       117         130         133         135         134    
Other operating expenses       1,760         1,163         1,238         1,102         1,563    
      Total non-interest expense       7,941         7,188         6,966         7,232         7,804    
Income before income taxes       8,817         2,238         2,920         2,445         2,631    
Income tax expense        1,749         388         508         426         8,745    
Net income (loss)   $   7,068     $   1,850     $   2,412     $   2,019     $   (6,114 )  
                             
Income (loss) per share                      
  Basic     $   0.42     $   0.11     $   0.14     $   0.12     $   (0.36 )  
  Diluted     $   0.42     $   0.11     $   0.14     $   0.12     $   (0.36 )  
                             
Cash dividends declared per common  share    $   0.05     $   0.04     $   0.04     $   0.04     $   0.04    
Weighted average number of shares outstanding:                      
  Basic       16,820,337       16,818,625       16,792,812       16,763,401       16,757,963    
  Diluted       16,840,933       16,838,547       16,819,286       16,789,336       16,774,209    
 

 

FNCB Bancorp, Inc.
Consolidated Balance Sheets
                           
   
  Dec 31,   Sept 30,   Jun 30,   Mar 31,   Dec 31,
(in thousands)     2018       2018       2018       2018       2017  
Assets                  ...