FNCB Bancorp, Inc. Reports 2016 Earnings of $6.3 M

DUNMORE, Pa., Jan. 26, 2017 (GLOBE NEWSWIRE) -- FNCB Bancorp, Inc. (OTCQX:FNCB) (“FNCB”), the parent company of Dunmore-based FNCB Bank (the “Bank”), today reported net income of $6.3 million, or $0.38 per basic and diluted share, for the year ended December 31, 2016. Net income for the fourth quarter of 2016 was $1.5 million, or $0.09 per basic and diluted share.

2016 HIGHLIGHTS              

• FNCB reported net income for the fourth consecutive fiscal year. Cumulative net income for fiscal years 2013 through 2016 totaled $62.0 million.
• Net interest income increased $3.1 million, or 11.5%, to $30.5 million in 2016 from $27.4 million in 2015.  
• Total assets increased $104.8 million to $1.2 billion at December 31, 2016 from $1.1 billion at December 31, 2015, an increase of 9.6%.
• Total deposits increased $193.6 million, or 23.6%, to $1.0 billion at year-end 2016 from $821.5 million at year-end 2015.
• Non-performing assets decreased $0.5 million, or 7.2%, from $6.9 million at December 31, 2015 to $6.4 million at the close of 2016.
• FNCB paid $10.9 million deferred interest on subordinated debt in March 2016 and accelerated the payment of $4.0 million in principal on the subordinated debt due September 1, 2017 to December 1, 2016.
• FNCB resumed quarterly shareholder dividend payments in March 2016, and declared and paid dividends throughout the remainder of 2016.
• FNCB reinstated its dividend reinvestment and optional cash purchase plans in June 2016.
• FNCB declared a fourth quarter 2016 dividend of $0.03 per share, an increase of 50.0% compared to the $0.02 per share dividend declared for the third quarter of 2016.
• FNCB’s tangible book value improved 4.0% to $5.42 per share at December 31, 2016 from $5.21 per share at December 31, 2015.
• The Bank successfully completed a conversion from a federal charter to a state charter in the second quarter 2016.

“We are pleased with the continued success of our Company in 2016,” stated Gerard A. Champi, President and Chief Executive Officer. “We were able to deliver strong balance sheet growth and solid core-banking performance as evidenced by a double-digit increase in net interest income. We believe that the achievements we’ve made over the past four years have allowed us to create value for our shareholders, including growth in book value and the reinstatement of quarterly dividend payments as well as the dividend reinvestment and optional cash purchase plans,” continued Champi. “We are optimistic as we enter 2017 with the announcement of our planned expansion into the Lehigh Valley marketplace through the opening of a loan production office. We are excited to begin offering FNCB’s community bank brand and commitment to unsurpassed customer service to the Lehigh Valley,” concluded Champi.     

Net income for the year ended December 31, 2015 was $35.8 million, or $2.17 per basic and diluted share. For the fourth quarter of 2015, FNCB recorded net income of $29.2 million, or $1.77, per basic and diluted common share. FNCB’s 2015 earnings performance was significantly impacted by the non-recurring reversal of a deferred tax asset (“DTA”) valuation allowance, which resulted in tax benefits of $27.7 million and $27.8 million in the consolidated statement of income for the fourth quarter and year ended December 31, 2015, respectively.

For the fourth quarter and year ended December 31, 2016, dividends declared and paid were $0.03 and $0.09 per share, respectively. The dividend payout ratio for 2016 was 23.7% and equaled a 1.5% annual return to shareholders based on the closing stock price of $6.05 per share at December 31, 2016. FNCB did not pay any dividends in 2015.

Return on average assets and return on average shareholders’ equity were 0.57% and 6.82%, respectively, in 2016, compared to 3.57% and 63.24%, respectively, in 2015. For the three months ended December 31, 2016, return on average assets and return on average shareholders’ equity were 0.55% and 6.43%, respectively, compared to 10.99% and 192.68%, respectively, for the same three months of 2015.  Return on average assets and return on average shareholders’ equity for the fourth quarter and fiscal year ended December 31, 2015 were significantly impacted by the non-recurring $27.8 million tax benefit detailed above.

Summary Results for 2016

Net interest income before the credit for loan and lease losses increased $3.2 million, or 11.5%, to $30.6 million in 2016 from $27.4 million in 2015. The improvement in net interest income reflected a $2.5 million increase in interest income, coupled with a $0.6 million, or 12.6%, reduction in interest expense, in 2016 compared to 2015. The 7.9% increase in interest income in 2016 was largely due to an increase in average earning assets of $58.4 million, or 6.2%, to $1.0 billion in 2016 from $942.1 million in 2015. Specifically, average loans increased $35.0 million, or 5.0%, to $731.6 million in 2016 from $696.6 million in 2015, while average investment securities increased $34.4 million, or 15.1%, to $261.8 million in 2016 from $227.4 million in 2015. The 12.6% reduction in interest expense was due primarily to an 11 basis point reduction in FNCB’s cost of funds to 0.50% in 2016 from 0.61% in 2015.  In 2016, FNCB realized a full year of the effect of its $11.0 million principal payment and a 450 basis point rate modification of its subordinated debentures, which was completed on June 30, 2015. As a result, interest expense on its subordinated debentures decreased $0.8 million, or 56.9%, in 2016 as compared to 2015. Overall, the average cost of borrowed funds decreased 59 basis points to 1.42% in 2016 from 2.01% in 2015. FNCB anticipates further reductions in borrowing costs in 2017 as a result of its accelerated repayment of $4.0 million in principal on its subordinated debentures which had a stated due date of September 1, 2017, but was paid by FNCB on December 1, 2016. FNCB’s tax-equivalent margin improved 14 basis points to 3.13% in 2016 from 2.99% in 2015. The margin improvement reflected the growth in average earning assets, as well as the positive effects of the reduced cost of borrowing funds.

Non-interest income decreased $1.6 million to $6.2 million in 2016 from $7.8 million in 2015. The 20.5% decrease was largely due to a $1.3 million, or 58.2%, decrease in net gains on the sale of investment securities.

Total non-interest expense decreased $0.9 million, or 3.2%, to $27.6 million in 2016 from $28.5 million in 2015. The decrease primarily reflected $0.8 million in non-recurring legal settlements that were accrued in 2015, coupled with decreases in occupancy costs of $0.5 million, or 22.2%, regulatory assessments of $0.2 million, or 23.3%, and insurance expense of $0.1 million, or 21.7%. Partially offsetting these decreases were increases in salaries and benefits of $0.5 million, equipment expense of $0.1 million, or 4.5%, and bank shares tax of $0.1 million, or 18.6%. The improvement in net interest income, and reduced expense levels, are reflected in an improvement in FNCB’s efficiency ratio to 75.49% in 2016 from 84.70% in 2015.

Improved Asset Quality

Asset quality continued to improve in 2016, reflecting FNCB’s continued focus on sound problem credit resolutions and commitment to disciplined credit risk management. Total non-performing assets decreased $0.5 million, or 7.2%, to $6.4 million at December 31, 2016 from $6.9 million at December 31, 2015. Decreases in non-performing loans, including non-accruing troubled debt restructurings, of $1.6 million and other real estate owned (“OREO”) of $1.1 million were partially offset by an increase in other non-performing assets of $2.2 million. Other non-performing assets include a classified account receivable secured by a letter of credit and foreclosed equipment.

The ratio of non-performing loans to total loans improved 21 basis points, or 40.4%, to 0.31% at December 31, 2016, compared to 0.52% at December 31, 2015. The allowance for loan and lease losses as a percentage of total loans was 1.15% at December 31, 2016 compared to 1.20% at the end of 2015. Net charge-offs as a percentage of average loans outstanding for the year ended December 31, 2016 was 0.21%, compared to 0.20% for the year ended December 31, 2015.

Financial Position

Total assets increased $104.8 million, or 9.6%, to $1.2 billion at December 31, 2016 from $1.1 billion at December 31, 2015. The balance sheet growth primarily reflected an increase in total deposits of $193.6 million, or 23.6%, a portion of which was used to repay $77.3 million in FHLB advances, accelerate the $4.0 million principal payment on the subordinated debentures, and fund net increases in loans, net of deferred costs and unearned income, and investment securities of $0.6 million and $18.9 million, respectively. With regard to the increase in total deposits, specifically, non-interest-bearing demand accounts increased $19.2 million, or 12.4%, and interest-bearing deposits increased $174.4 million, or 26.2% comparing December 31, 2016 and 2015. The increase in non-interest-bearing demand deposits is primarily attributable to growth in business checking accounts, while growth in municipal deposits contributed to the increase in interest-bearing deposits.

Total shareholders’ equity improved $4.0 million, or 4.6%, to $90.1 million at December 31, 2016 from $86.2 million at the end of 2015, which resulted primarily from net income for 2016 of $6.3 million, partially offset by a $1.5 million increase in accumulated other comprehensive loss resulting from depreciation in the market value, net of tax, of FNCB’s available-for-sale securities, due to changes in market interest rates. Also affecting shareholders’ equity were dividends declared and paid of $1.5 million, common shares issued through the dividend reinvestment and optional cash purchase plans of $0.4 million and stock-based compensation of $0.3 million.

FNCB’s total risk-based capital ratio and the Tier 1 leverage ratio improved to 12.06% and 7.53%, respectively, at December 31, 2016, from 11.79% and 7.27%, respectively, at December 31, 2015. 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, which became effective for the Company and the Bank on January 1, 2016.

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, which provides personal, small business and commercial banking services to individuals and businesses in Northeastern Pennsylvania and the Lehigh Valley through its 19 branch offices and Allentown-based Limited Purpose Office.  The institution was established as a National Banking Association in 1910 as The First National Bank of Dunmore and operated under the name First National Community Bank from 1988 through June 2016. On June 30, 2016, the institution changed its name to FNCB Bank upon its conversion from a national charter to a Pennsylvania state charter.  For more information about the BauerFinancial 5-Star rated 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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INVESTOR CONTACT: James M. Bone, Jr., CPA Executive Vice President and Chief Financial Officer FNCB Bank (570) 348-6419 james.bone@fncb.com