FNCB Bancorp, Inc. Announces 2019 Earnings

DUNMORE, Pa., Jan. 24, 2020 (GLOBE NEWSWIRE) -- FNCB Bancorp, Inc. FNCB, the parent company of Dunmore-based FNCB Bank (the "Bank"), today reported net income for 2019 of $11.1 million, or $0.56 per basic and diluted share, compared to net income of $13.3 million, or $0.79 per basic and diluted share, for 2018. The $2.3 million, or 17.0%, earnings reduction was largely due to a $4.2 million decrease in non-interest revenue, partially offset by decreases in the provision for loan and lease losses and income tax expense of $1.8 million and $0.7 million, respectively. Net income for the fourth quarter of 2019 was $3.5 million, a decrease of $3.6 million, or 50.7%, compared to $7.1 million for the same quarter of 2018, which primarily reflected a $4.7 million decrease in non-interest income, partially offset by a $1.0 million decrease in income tax expense. Included in non-interest income for the three months and year ended December 31, 2018 was $6.0 million in non-recurring income related to an insurance recovery.

Return on average assets and return on average shareholders' equity were 0.92% and 8.88%, respectively, in 2019, compared to 1.09% and 15.38%, respectively in 2018. For the three months ended December 31, 2019, annualized return on average assets and annualized return on average shareholders' equity were 1.15% and 10.43%, respectively. Comparatively, annualized return on average assets was 2.26% and annualized return on average shareholders' equity was 32.26% for the three months ended December 31, 2018.

Dividends declared and paid in 2019 totaled $0.20 per share, an increase of $0.03 per share, or 17.6%, compared to $0.17 per share for 2018. Total dividends declared and paid for 2019 equated to a dividend yield of approximately 2.37% based on the closing stock price of $8.45 per share at December 31, 2019.

2019 Highlights:

• Successfully completed a $23.0 million common stock offering in the first quarter of 2019;  
• Joined the Russell 3000® Index effective July 1, 2019;  
• Celebrated the grand opening of FNCB Bank's 17th community office located in Mountain Top, Luzerne County, Pennsylvania in the second quarter of 2019;   
• Completed the relocation and new construction of FNCB Bank's Main Office to a brand new, state-of-the-art facility with a grand re-opening in the fourth quarter of 2019;  
• Total risk-based capital and Tier I Leverage ratios improved to 16.11% and 11.37% at December 31, 2019 compared to 12.69% and 8.50% at December 31, 2018, respectively;  
• Yield on earning assets (FTE) for the fourth quarter increased 10 basis points year over year to 4.16% in 2019 compared to 4.06% in 2018;
• Cost of funds for the fourth quarter of 2019 decreased 6 basis points to 0.98% from 1.04% for the fourth quarter of 2018;
• Net interest margin (FTE) improved 21 basis points to 3.38% from 3.17% comparing the fourth quarters for 2019 and 2018, respectively; and    
• Dividend payout ratio reached 36.4% in 2019.

"2019 was a successful year for our Company, and we would like to thank our entire FNCB team for all their hard work," stated Gerard A. Champi, President and Chief Executive Officer. "We were able to take advantage of changes in market conditions to re-position and create efficiency within our balance sheet by trading off lower-yielding assets for higher-yielding, higher-quality earning assets, while reducing our reliance on more expensive wholesale funding. This strategy has translated into consistent increases in earning asset yields, reductions in funding costs and improvement in our net interest margin throughout 2019," continued Champi. "We believe we are well-positioned to continue to create value within our franchise as we move forward into 2020," Champi concluded.  

Summary Results 

For the three months ended December 31, 2019, tax-equivalent net interest income increased $0.1 million, or 1.6% to $9.4 million from $9.3 million for the same three months of 2018. Additionally, FNCB's tax-equivalent net interest margin for the fourth quarter of 2019 improved 21 basis points to 3.38% compared to 3.17% for the same quarter of 2018. The margin improvement primarily reflected an increase in the tax-equivalent yield on average earning assets of 10 basis points to 4.16% for the fourth quarter of 2019 from 4.06% for the same quarter of 2018, coupled with a 6 basis-point decrease in the cost of funds to 0.98% for the three months ended December 31, 2019 from 1.04% for the same three months of 2018. For the year ended December 31, 2019, tax-equivalent net interest income decreased $0.3 million, or 0.8%, to $36.7 million compared to $37.0 million for the year ended December 31, 2018. The modest decrease in net interest income for the year-to-date period was largely due to higher funding costs, partially offset by an increase in the tax-equivalent yield on average earning assets. For the year ended December 31, 2019, the cost of funds increased 18 basis points to 1.08% from 0.90% for the year ended December 31, 2018. Conversely, the tax-equivalent earning-asset yields improved 18 basis points to 4.15% in 2019 compared to 3.97% in 2018. The tax-equivalent net interest margin improved 5 basis points to 3.27% in 2019 from 3.22% in 2018. Additionally, the net interest margin for the fourth quarter of 2019 improved 6 basis points to 3.38% from 3.32% for the third quarter of 2019. 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 2019 and 2018.

For the quarter ended December 31, 2019, non-interest income amounted to $2.7 million, a decrease of $4.7 million, or 63.7%, compared to $7.4 million for the same period of 2018. Non-interest income totaled $7.6 million for the year ended December 31, 2019, a decrease of $4.2 million, or 35.4%, compared to $11.8 million for the year ended December 31, 2018. The decrease in non-interest income for the fourth quarter and year-to-date periods was primarily due to an 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, 2019 were net gains on the sale of available-for-sale securities of $0.5 million and $1.2 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, 2019, non-interest expense decreased by $0.1 million, or 1.7%, to $7.8 million from $7.9 million for the comparable three months of 2018. Non-interest expense for all of 2019 totaled $29.7 million, an increase of $0.4 million, or 1.2%, from $29.3 million for 2018. The increase in non-interest expense resulted largely from higher salaries and employee benefits expense related to staffing additions and annual merit increases, coupled with higher data processing costs and other expenses, which were partially offset by decreases in regulatory assessments, other losses and bank shares tax. 

Asset Quality

Total non-performing loans increased $4.4 million to $9.1 million, or 1.10% of total loans, at December 31, 2019 from $4.7 million, or 0.56% of total loans, at December 31, 2018. FNCB's loan delinquency rate (total delinquent loans as a percentage of total loans) was 1.46% at December 31, 2019 compared to 0.93% at the end of 2018. The increase in non-performing loans and loan delinquencies primarily reflected several large commercial relationships that were placed on non-accrual status during 2019. The net loans charged off, as a percentage of average loans, was 0.16% for 2019 compared to 0.25% for 2018. The allowance for loan and lease losses as a percentage of gross loans was 1.08% and 1.13% at December 31, 2019 and 2018, respectively.

Financial Condition

Total assets decreased $34.2 million, or 2.8%, to $1.204 billion at December 31, 2019, from $1.238 billion at December 31, 2018.  The change in the balance sheet primarily reflected decreases in available-for-sale debt securities, loans, net of net deferred loan costs and unearned income, and cash and cash equivalents. Available-for-sale debt securities decreased $23.2 million, or 7.8%, to $272.8 million at December 31, 2019 from $296.0 million at December 31, 2018. Proceeds from the sale of available-for-sale debt securities, not re-invested back into the portfolio, were used to supplement deposit gathering. Loans, net of net deferred loan costs and unearned income, contracted $10.6 million, or 1.3%, to $828.5 million at December 31, 2019, from $839.1 million at December 31, 2018, which primarily reflected a planned reduction in the indirect automobile loan portfolio. Total deposits decreased $93.9 million, or 8.6%, to $1.002 billion at December 31, 2019 from $1.096 billion at December 31, 2018. Interest-bearing deposits decreased $116.8 million, or 12.4%, to $822.2 million at December 31, 2019 from $939.0 million at December 31, 2018, which largely reflected a $75.8 million reduction in wholesale time deposits and the runoff of retail certificates of deposit. Partially offsetting the reduction in interest-bearing deposits was a $22.9 million, or 14.6%, increase in non-interest-bearing demand deposits to $179.5 million at December 31, 2019 from $156.6 million at December 31, 2018. Total borrowed funds increased $23.0 million to $57.2 million at December 31, 2019 from $34.2 million at December 31, 2018. 

Total shareholders' equity increased $36.4 million, or 37.4%, to $133.6 million at December 31, 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 2019 of $11.1 million and a $7.6 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 $4.0 million. FNCB's total risk-based capital and Tier I leverage ratios improved to 16.11% and 11.37%, respectively, at December 31, 2019 compared to 12.69% and 8.50%, respectively, at December 31, 2018. Additionally, tangible book value improved $0.84, or 14.5%, to $6.62 per share at December 31, 2019 from $5.78 per share 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 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.