FNCB Bancorp, Inc. Announces 1st Quarter 2018 Earnings

DUNMORE, Pa., April 20, 2018 -- FNCB Bancorp, Inc. (NASDAQ:FNCB) (“FNCB”), the parent company of Dunmore-based FNCB Bank (the “Bank”), today reported net income of $2.0 million, or $0.12 per basic and diluted share, for the three months ended March 31, 2018, compared to net income of $2.2 million, or $0.13 per basic and diluted share, for the same period of 2017. For the first quarter of 2018, higher net interest income and a reduction in income tax expense were slightly more than offset by an increase in non-interest expense and a $0.7 million provision for loan and lease losses compared to a credit for loan and lease losses of $0.5 million for the same three months of 2017.  The provision for loan losses for the first quarter of 2018 largely reflected strong loan growth, as loans, net of unearned income and net deferred loan costs, increased $37.6 million, or 4.9%, from December 31, 2017. Annualized return on average assets and return on average equity was 0.70% and 9.44%, respectively, for the three months ended March 31, 2018, compared to 0.78% and 9.77%, respectively, for the same three months of 2017. FNCB paid holders of its common stock a dividend of $0.04 per share for the first quarter of 2018, a 33.3% increase compared to $0.03 per share for the same period of 2017.

1^st QUARTER 2018 HIGHLIGHTS

• Net interest income increases $1.0 million, or 12.6%, comparing first quarters of 2018 and 2017;
• First quarter 2018 net interest margin (FTE) improves 19 basis points to 3.26%, compared to 3.07% for the same quarter of 2017;
• Year over year growth in loans, net of unearned income, of $92.8 million, or 13.0%;
• FNCB common stock began trading on The Nasdaq Capital Market effective with the opening bell on March 5, 2018;
• First quarter dividend increases 33.3% comparing 2018 and 2017.

“Strong, organic loan growth was the driving factor behind our operating performance for the first quarter of 2018, leading to significant improvement in net interest income,” said Gerard A. Champi, President and Chief Executive Officer. “The loan growth directly factored into a higher loan and lease loss provision, as our asset quality continues to remain favorable,” continued Champi. “We are excited to enter the second quarter of 2018 and look forward to the opening of our new, state-of-the-art branch office located in Plains Township, Luzerne County, Pennsylvania. This new branch, which will feature the “personal banker” model, will provide our customers with an enhanced, more personalized banking experience,” concluded Champi.

Summary Results for the First Three Months of 2018
Tax-equivalent net interest income increased $0.9 million, or 11.3%, to $9.0 million for the first three months of 2018, from $8.1 million for the same period in 2017. The improvement reflected strong growth in average-earning assets and higher yields on the loan and investment portfolios due to increases in market interest rates, partially offset by an increase in the cost of funds. Tax-equivalent interest income increased $1.4 million, or 15.5%, to $10.5 million for the three-month period ended March 31, 2018 compared to $9.1 million for the same period of 2017. Partially offsetting the increase in interest income was a $0.5 million increase in interest expense comparing the first quarters of 2018 and 2017. The increase in tax-equivalent interest income comparing the three months ended March 31, 2018 and 2017 primarily resulted from a $48.8 million, or 4.6%, increase in average earning assets, specifically a $68.4 million, or 9.4%, increase in average loans and a $16.1 million, or 5.6%, increase in average available-for-sale investment securities, partially offset by a decrease in average interest-bearing deposits in other banks of $35.7 million. The tax-equivalent yields earned on the loan and investment portfolios increased 28 basis points and 19 basis points, respectively, comparing the first quarters of 2018 and 2017. Interest expense increased $0.5 million, or 47.9%, to $1.6 million for the three months ended March 31, 2018 from $1.1 million for the same period of 2017. Impacted by higher market interest rates, FNCB’s cost of funds rose 21 basis points to 0.69% for the first quarter of 2018 from 0.48% for the same quarter of 2017. Average interest-bearing deposits declined $1.5 million to $806.5 million for the three months ended March 31, 2018 from $808.0 million for the same three months of 2017. Conversely, average borrowed funds increased $24.4 million, or 31.1%, to $102.7 million for the first quarter of 2018 from $78.3 million for the same quarter of 2017.

For the three months ended March 31, 2018, non-interest income totaled $1.5 million compared to $1.6 million for the same three months of 2017. Included in non-interest income for 2017 were net gains on the sale of available-for-sale securities of $278 thousand. There were no net gains on sales of available-for-sale securities during the first quarter of 2018. FNCB did record net gains on the sale of loans guaranteed by the Small Business Administration (SBA) for the first quarter of 2018 in the amount of $251 thousand.

Non-interest expense for the three months ended March 31, 2018 was $7.2 million, an increase of $0.3 million, or 4.4%, compared to $6.9 million for the same three months of 2017. The increase largely reflected increases in salaries and employee benefits expense due mostly to additional staff and other expenses.

Financial Position

Total assets increased $27.0 million, or 2.3%, to $1.189 billion at March 31, 2018 from $1.162 billion at December 31, 2017. The growth in the balance sheet largely reflected strong demand for the Bank’s lending products as loans, net of net deferred loan costs and unearned income grew $37.6 million, or 4.9%, to $808.2 million at March 31, 2018 from $770.6 million at December 31, 2017. In addition, available-for-sale investment securities increased $8.8 million, or 3.1%, to $298.3 million at March 31, 2018 from $289.5 million at the end of 2017. Total deposits decreased $47.2 million, or 4.7%, to $955.3 million at March 31, 2018 from $1.002 billion at December 31, 2017. The decrease in total deposits was due primarily to the cyclical deposit trends of public funds. Despite the decrease from year-end 2017, FNCB experienced solid growth year over year in both non-interest bearing and interest-bearing deposits, as total deposits grew $31.8 million, or 3.4%, from $923.4 million at March 31, 2017.

FNCB’s asset quality improved, as total non-performing assets decreased $0.6 million, or 11.3%, to $4.9 million at March 31, 2018 from $5.5 million at December 31, 2017. The improvement was primarily due to a $0.4 million reduction in other real estate owned to $0.6 million at March 31, 2018 from $1.0 million at year-end 2017. In addition, non-accrual loans decreased $0.2 million to $2.4 million at March 31, 2018 from $2.6 million at December 31, 2017. The ratio of non-performing loans to total loans improved to 0.30% at March 31, 2018, compared to 0.34% at December 31, 2017. Annualized net charge-offs were 0.10% of average loans outstanding for the quarter ended March 31, 2018, compared to a net recovery of 0.20% of average loans outstanding for the same quarter of 2017. The allowance for loan losses as a percentage of loans, net of unearned income and net deferred loan costs, was 1.18% and 1.17% at March 31, 2018 and December 31, 2017, respectively.

Total shareholders’ equity was $86.7 million at March 31, 2018 compared to $89.2 million at December 31, 2017. The $2.5 million reduction was due primarily to an increase in accumulated other comprehensive loss of $3.9 million resulting from market value depreciation of FNCB’s available-for-sale investment securities, net of deferred income taxes, coupled with dividends declared and paid of $0.7 million. Partially offsetting these reductions was net income of $2.0 million for the three months ended March 31, 2018.

FNCB’s total risk-based capital ratio and the Tier 1 leverage ratio were 11.70% and 7.80%, respectively at March 31, 2018, compared to 12.08% and 7.74%, respectively, at December 31, 2017. The ratios exceeded the 10.00% and 5.00% required to be well capitalized under the prompt corrective action provisions of the Basel III capital framework for U.S. Banking organizations.

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 Northeastern Pennsylvania’s premier community bank – 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 18 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
[email protected]

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, 2017.

[FNCB provides tabular information as follows]