First National Community Bancorp, Inc. Announces Third Quarter 2013 Net Income of $1.9 Million
DUNMORE, Pa., Nov. 12, 2013 /PRNewswire/ -- First National Community Bancorp, Inc. (OTCQB: FNCB), the parent company of Dunmore-based First National Community Bank, today announced continued improvement in operating results for the third quarter and nine months ended September 30, 2013, compared to the prior year periods. The Company reported net income of $1.9 million, or $0.11 per basic and diluted share, compared to a net loss of $6.5 million, or $(0.40) per basic and diluted share, for the third quarter of 2012. Net income for the nine months ended September 30, 2013 was $4.3 million, or $0.26 per basic and diluted share, compared to a net loss of $8.7 million, or $(0.53) per basic and diluted share, for the comparable period of 2012. The improved performance for the quarter and nine months ended September 30, 2013 resulted primarily from: a reduction in the allowance for loan and lease losses reserve of $1.2 million and $2.4 million respectively, compared with loan and lease loss provisions of $3.8 million and $3.4 million for the prior year comparable periods; an increase in non-interest income of $0.7 million and $2.5 million for the respective periods, primarily reflecting increased gains on the sale of securities; and decreased non-interest expense of $3.1 million and $6.7 million for the respective periods, primarily due to successful cost containment initiatives and reduced reliance on outside consultants.
- A $59.5 million increase in net loans compared to December 31, 2012
- A $3.1 million, or 27.8%, decrease in third quarter non-interest expense, and a $6.7 million, or 21.6%, reduction in non-interest expense for the first nine months, compared with the prior year comparable periods
- A 20 basis point improvement, to 1.10%, in the third quarter ratio of non-performing loans to total loans, compared to 1.30% at June 30, 2013, and a 52 basis point improvement, compared with 1.62% at December 31, 2012
- A $2.5 million, or 25.6%, decrease in non-performing loans from December 31, 2012
- The Bank's total risk-based capital of $84.8 million, or 12.62% of risk-weighted assets at September 30, 2013, was up $6.4 million from December 31, 2012
"Our third quarter 2013 results represent continued meaningful improvement in the Bank's operating performance and encompasses our focus on organic loan generation, core deposit (demand deposit and savings accounts) growth, improving our operating profile, and maintaining solid asset quality metrics," said Steven R. Tokach, President and Chief Executive Officer. "Despite sluggish economic activity across our market area, we generated annualized net loan growth of nearly 14% through the first three quarters, reflecting strong activity in our residential and commercial real estate portfolios, as well as solid gains in our consumer lending portfolio. Our asset quality has continued to improve throughout 2013, reflecting our commitment to sound underwriting and credit monitoring practices. Non-performing loans at September 30, 2013 were $7.2 million, down from $8.3 million and $9.7 million at June 30, 2013, and at December 31, 2012, respectively. We believe that this substantive improvement reflects effective efforts to manage problem credits through heightened and effective work-out activity on non-performing loans."
Summary Results for the Three and Nine Months Ended September 30, 2013
Net interest income before the credit for loan and lease losses was $6.4 million for the three months, and $19.1 million for the nine months ended September 30, 2013, compared to $6.8 million and $21.0 million for the respective periods in 2012. The reduced net interest income for the third quarter 2013 was a result of lower yields on average interest-earning assets, partially offset by reduced cost of funds and an increase in average loan balances, as a result of strong third quarter loan demand. Lower net interest income for the nine months ended September 30, 2013 was a result of a decline in the yield on average interest-earning assets coupled with a decrease in average interest-earning assets, which was partially mitigated by a decrease in average interest-bearing liabilities, and to a lesser extent, a decline in the cost of funds.
The tax-equivalent net interest margin for the third quarter 2013 was 3.17%, a decrease of 12 basis points compared with the third quarter 2012. Third quarter 2013 interest income on a tax equivalent basis declined by $912 thousand, compared with the prior year quarter, primarily as a result of a 27 basis point decrease in the yield on average interest-earning assets. Interest expense for the third quarter 2013 declined by $394 thousand, or 17.9%, compared to the third quarter 2012 reflecting an 18 basis point decrease in the cost of funds and a $17.5 million reduction in average interest-bearing liabilities.
Non-interest income was $2.4 million and $7.2 million for the three and nine months ended September 30, 2013, compared to $1.7 million and $4.7 million for the same periods in 2012. The increase in non-interest income was primarily the result of increased net gains on the sale of securities.
Non-interest expense for the three and nine months ended September 30, 2013 was $8.1 million and $24.3 million, respectively, a decrease of $3.1 million, or 27.8%, and $6.7 million, or 21.6%, respectively, compared to the same periods in 2012. The reduction in non-interest expense for the nine months ended September 30, 2013 was primarily a result of: a $2.5 million decrease in professional fees (consisting of accounting and consulting expenses); a $1.2 million decrease in salaries and employee benefits, reflecting the Company's fourth quarter 2012 reduction in force and voluntary separation program; a decline of $954 thousand in legal fees and a $685 thousand reduction in OREO expense. Professional fees are expected to continue to decline to more normalized levels in coming quarters, reflecting less reliance on outside advisors and consultants. We believe that legal fees will continue to decline pending the resolution of certain existing litigation matters.
Improved Asset Quality
The Company has realized substantial progress addressing problem credit issues during 2013, reflecting management's heightened work-out efforts on non-performing loans, and reduction in the Company's holdings of foreclosed properties.
The Company's total non-performing loans were $7.2 million at September 30, 2013, a decrease of $2.5 million, or 25.6%, from December 31, 2012. The ratio of non-performing loans to total loans improved to 1.10% at September 30, 2013, a decrease of 52 basis points compared to December 31, 2012. The Bank's ratio of non-performing loans to total loans continues to compare favorably to the average for FDIC commercial banks with assets between $300 million and $1 billion, which was 1.49% at September 30, 2013. The allowance for loan and lease losses as a percentage of non-accrual loans was 244% at September 30, 2013, up from 192% at December 31, 2012. The average for the above described FDIC peer group was 219% at September 30, 2013. During 2013, the Company reported net recoveries (as opposed to net charge-offs) from loans that were charged-off in prior periods. The Company's ratio of net recoveries to average loans outstanding for the nine months ended September 30, 2013 of 0.23% was primarily the result of a recovery of $1.5 million on one commercial loan during the first quarter of 2013. The ratio of net charge-offs to average loans for the FDIC peer group for the nine months ended September 30, 2013 was 0.27%.
For the third quarter and first nine months of 2013, the Company reported a credit provision for loan and lease losses of $1.2 million and $2.4 million, respectively, as compared to establishing provisions for loan and lease losses, of $3.8 million and $3.4 million for the comparable periods in 2012. The credit provision in 2013 reflected improved asset quality metrics, reductions in historical loss factors and net recoveries of $1.5 million for the nine months ended September 30, 2013.
The Company's total assets at September 30, 2013 were $978.5 million, an increase of $10.2 million compared to December 31, 2012. Total loans (before allowance for loan and lease losses) at September 30, 2013 were $656.1 million, an increase of $58.3 million compared to December 31, 2012 and up $14.1 million compared to June 30, 2013. Total deposits at September 30, 2013 were $853.8 million, a decrease of $803 thousand from December 31, 2012, and an increase of $24.1 million from June 30, 2013. Total borrowed funds were $72.5 million at September 30, 2013, compared to $53.9 million at December 31, 2012.
The Bank's capital position continued to strengthen during the third quarter of 2013. At September 30, 2013, the total risk-based capital ratio was 12.62%, an increase of 35 basis points from June 30, 2013. The Tier 1 risk-based capital ratio of 11.35% was also up 35 basis points compared to June 30, 2013, and the Tier 1 leverage ratio was down 2 basis points to 7.99%, compared to the same period.
Service Area Refocused
On August 16, 2013, we announced the execution of a "Branch Purchase and Deposit/Loan Assumption Agreement" for the sale of our Monroe County retail banking activities to ESSA Bank & Trust. The process is expected to be completed in the first quarter of 2014. Upon closing, this transaction will provide an immediate financial benefit while further strengthening our capital position. This transaction is strategically consistent with the steps we've taken to improve operating efficiency and profitability, and it demonstrates our intention to strengthen our focus on our core service areas in Lackawanna, Luzerne and Wayne counties.
Availability of Filings
A copy of the Company's Form 10-Q for the quarter ended September 30, 2013 will be provided upon request from: Shareholder Relations, First National Community Bancorp, Inc., 102 East Drinker Street, Dunmore, PA 18512 or by calling (570) 348-6419. The Company's September 30, 2013 quarterly report on Form 10-Q is also available on the Investor Relations page of the Company's website, www.fncb.com, and on the SEC website at: http://www.sec.gov/edgar/searchedgar/companysearch.html
About First National Community Bank
First National Community Bancorp, Inc. is the bank holding company of First National Community Bank, which provides personal, small business and commercial banking services to individuals and businesses throughout Northeastern Pennsylvania. At the completion of a pending Purchase and Assumption Agreement for the sale of its retail banking activities in Monroe County, Pennsylvania, FNCB will have 19 retail branch locations in Lackawanna, Luzerne, and Wayne counties. The institution was established as a National Banking Association in 1910 as The First National Bank of Dunmore, and has been operating under its current name since 1988. The Company's common stock trades on the OTCQB under the symbol FNCB. For more information about FNCB, visit www.fncb.com.
James M. Bone, Jr., CPA
Executive Vice President and
Chief Financial Officer
First National Community Bank
This release contains forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Actual results and trends could differ materially from those set forth in such statements due to various risks, uncertainties and other factors (some of which are beyond the Company's control). The words "may," "could," "should," "would," "believe," "anticipate," "estimate," "expect," "intend," "plan" and similar expressions are intended to identify forward-looking statements. Such risks, uncertainties and other factors that could cause actual results and experience to differ include, but are not limited to, the following: the strength of the United States economy in general and the strength of the local economies in the Company's 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 the Company to compete with other institutions for business; the composition and concentrations of the Company's lending risk and the adequacy of the Company's reserves to manage those risks; the valuation of the Company's investment securities; the ability of the Company to pay dividends or repurchase common shares; the ability of the Company to retain key personnel; the impact of any pending or threatened litigation against the Company; the marketability of shares of the Company and fluctuations in the value of the Company's share price; the impact of the Company's ability to comply with its regulatory agreements and orders; the effectiveness of the Company's system of internal controls; the ability of the Company to attract additional capital investment; the timing of the Company's annual shareholder meeting; the impact of changes in financial services' laws and regulations (including laws concerning taxes, banking, securities, capital adequacy and insurance); the impact of technological changes and security risks upon the Company's information technology systems; changes in consumer spending and saving habits; the nature, extent, and timing of governmental actions and reforms, and the success of the Company at managing the risks involved in the foregoing and other risks and uncertainties, including those detailed in the Company's filings with the Securities and Exchange Commission.
The Company 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 release, even if subsequently made available by the Company on its website or otherwise. The Company 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 the Company to reflect events or circumstances occurring after the date of this release. Readers should carefully review the risk factors described in the Annual Report and other documents that the Company periodically files with the Securities and Exchange Commission, including its Form 10-K for the year ended December 31, 2012.
SOURCE First National Community Bancorp, Inc.