First National Community Bancorp, Inc. Reports 79% Increase in Third Quarter 2014 Earnings
DUNMORE, Pa., Nov. 10, 2014 /PRNewswire/ -- First National Community Bancorp, Inc. (OTCQB: FNCB), the parent company of Dunmore-based First National Community Bank, today announced a 78.9% increase in operating results for the three months ended September 30, 2014 over the same period of 2013. The Company reported net income of $3.4 million, or $0.20 per basic and diluted share, for the third quarter of 2014, compared to net income of $1.9 million, or $0.11 per basic and diluted share, for the same quarter of 2013. Net income for the nine months ended September 30, 2014 was $13.5 million, or $0.82 per basic and diluted share, a 214.0% increase compared to net income of $4.3 million, or $0.26 per basic and diluted share, for the comparable period of 2013. The improved performance for the third quarter resulted primarily from increases in non-interest income and net interest income, partially offset by a decrease in the credit for loan and lease losses. The increase in year-to-date net income reflected higher net interest and non-interest income, coupled with an increase in the credit for loan and lease losses for the nine-month period as a result of a $3.6 million full recovery on a previously charged-off commercial loan.
Performance Highlights:
- At September 30, 2014 the Bank continued to exceed all regulatory capital levels mandated by the OCC Consent Order.
- Annualized return on average assets and average shareholders' equity were 1.85% and 41.43% for the year-to-date period ended September 30, 2014, compared to 0.62% and 16.80% for the same period of 2013.
- Net interest income grew 5.0% for the nine months ended September 30, 2014.
- A 3 basis point improvement in the tax-equivalent net interest margin comparing the third quarters of 2014 and 2013.
- Net loan growth of 5.8% for the nine months ended September 30, 2014.
- Continued asset quality improvement as evidenced by decreases of 12.3% in non-performing loans and 38.4% in other real estate owned compared to December 31, 2013.
- A 17 basis point improvement in the ratio of non-performing loans to total loans to 0.82% at September 30, 2014 compared to 0.99% at December 31, 2013.
"The Company's very strong third quarter and year-to-date 2014 performance reflected improved net interest income, a stronger asset quality profile to that of national peer banks and ongoing management efforts to reduce operating costs," stated Steven R. Tokach, President and Chief Executive Officer. "Continued improvement in our financial performance and condition is reflective of the strength of our core banking franchise in Northeast Pennsylvania, effective loan work-out and recovery efforts and our focus on organic loan and deposit growth within our markets. The net result of our performance over the past couple years can be seen in both the Bank's enhanced core profitability performance as well as our capital position which exceeds all regulatory minimum requirements. FNCB is now solidly positioned to compete and grow within its service area, and to create long-term value for our shareholders."
Summary Results for the Three and Nine Months Ended September 30, 2014
Net interest income before the credit for loan and lease losses was $6.8 million for the third quarter, and $20.0 million for the nine months ended September 30, 2014 compared to $6.4 million and $19.1 million, respectively, for the same periods in 2013. The increase was primarily a result of lower interest expense on deposits and higher interest and dividend income on securities. The third quarter tax-equivalent net interest margin was 3.18%, an increase of 3 basis points from the prior year period, and an increase of 2 basis points compared to the second quarter of 2014. Despite the quarterly margin improvement, the tax-equivalent margin for the nine months ended September 30, 2014 was 3.14%, 7 basis points lower compared to 3.21% for the same period of 2013, due primarily to the repositioning of our investment securities portfolio from tax-free to taxable securities. Interest expense for the three and nine months ended September 30, 2014 decreased $311 thousand and $863 thousand, respectively, compared to the same periods in 2013, which resulted primarily from the continued reduction in the average cost of funds due to a positive change in the mix of non-interest-bearing and interest-bearing deposits accounts. The cost of funds decreased 14 basis points for the three-month period and 17 basis points for the nine-month period ended September 30, 2014 compared to the same periods of 2013.
Non-interest income was $4.4 million and $12.9 million for the three and nine months ended September 30, 2014, compared to $2.4 million and $7.2 million for the same periods in 2013. The $2.0 million, or 83.3%, increase in third quarter 2014 non-interest income was primarily the result of increased net gains on the sale of securities. The $5.7 million, or 79.2%, increase in non-interest income for the year-to-date period primarily reflected increased net gains on security sales and the recovery of all past due interest, late charges and legal and other expenses as part of a settlement of previously charged-off commercial real estate loans, and a first quarter gain from a divestiture of retail banking operations in Monroe County.
Non-interest expense for the three months ended September 30, 2014 decreased $281 thousand, or 3.5%, to $7.8 million compared to $8.1 million for the same period of 2013. The decrease in non-interest expense for the three-month period in 2014 resulted primarily from reductions in FDIC and OCC assessments due to an improvement in the Bank's risk category, as well as decreases in bank shares tax, legal and insurance expenses, partially offset by higher OREO expenses and other operating expenses. For the year-to-date period ended September 30, non-interest expense totaled $24.7 million in 2014 compared to $24.3 million in 2013. The $458 thousand increase resulted primarily from increases in OREO-related expenses and other operating expenses, partially offset by reductions in the expense categories mentioned above for the quarterly change. The increase in OREO-related expenses reflected valuation adjustments of several OREO properties, including the Company's transfer of the Stroudsburg, Pennsylvania office from bank premises and equipment to OREO due to a change in the Bank's strategic purpose for the former branch office. Included in other operating expenses was a $352 thousand loss incurred on the abandonment of certain software not utilized by the Bank as originally intended.
Improved Asset Quality
The Bank's asset quality ratios continued to improve through September 30, 2014, reflecting our continued focus on aggressive problem credit resolutions. The Bank recorded net recoveries of $3.5 million for the nine months ended September 30, 2014, compared to $1.5 million for the same nine months of 2013.
The Bank received a substantial legal settlement in the amount of $5.8 million resulting from judgments filed by the Bank pursuant to a large credit relationship during the second quarter of 2014. Of the total amount received, $3.6 million represented full recovery of previously charged-off loans, which was the primary factor leading to the increase in the credit for loan and lease losses of $3.2 million for the nine months ended September 30, 2014. The remainder of the settlement represented satisfaction of all past due interest and late charges and reimbursement of all legal fees and other related expenses associated with these credits incurred and paid by the Bank, which, as previously mentioned, favorably impacted the Company's year-to-date non-interest income.
Total non-performing loans were $5.6 million at September 30, 2014, a decrease of $787 thousand, or 12.3%, from December 31, 2013. The ratio of non-performing loans to total loans improved to 0.82% at September 30, 2014, compared to 0.99% at December 31, 2013, a decrease of 17 basis points. (The FDIC average for commercial banks with assets between $300 million and $1 billion at September 30, 2014, was 1.17%.) The allowance for loan and lease losses as a percentage of total loans was 1.76%. (The above described FDIC peer group average at September 30, 2014 was 1.51%.) The Bank had an annualized ratio of net recoveries to average loans outstanding for the nine months ended September 30, 2014 of 0.71%, due to the previously mentioned commercial real estate loans recovery totaling $3.6 million. (The average net charge-offs to average loans outstanding for the FDIC peer group at September 30, 2014 was 0.16%.)
Financial Condition
Total assets amounted to $982.1 million at September 30, 2014 compared $1.0 billion at December 31, 2013. Total loans (before unearned income, deferred fees and the allowance for loan and lease losses) at September 30, 2014 were $677.4 million, an increase of $34.1 million, or 5.3%, compared to December 31, 2013 and up $7.1 million, or 1.1%, compared to June 30, 2014. Total deposits at September 30, 2014 were $803.2 million, a decrease of $81.5 million from December 31, 2013, which primarily reflected the Monroe County retail banking activity divestiture and continued run-off of certificates of deposit in the ongoing low interest rate environment. In contrast, total deposits increased $33.0 million or 4.3% from June 30, 2014 due primarily to normal seasonal inflows of municipal deposits. Total borrowed funds were $104.1 million at September 30, 2014 compared to $62.4 million at December 31, 2013.
At September 30, 2014, all of the Bank's regulatory capital ratios were in compliance with the OCC Consent Order mandated minimums of Total risk-based capital of 13.0% and Tier 1 leverage ratio of 9.0%. Specifically, First National Community Bank's capital ratios were as follows: Total risk-based capital ratio of 15.28%, Tier 1 risk-based capital ratio of 14.02%, and Tier 1 leverage ratio of 10.05%. The capital ratios at September 30, 2014 represent excess capital dollars of $15.8 million and $10.2 million, respectively, above the OCC Consent Order mandated minimums of Total risk-based capital of 13.0% and the Tier 1 leverage ratio of 9.0%. The capital ratios at September 30, 2014 represent excess capital dollars of $36.6 million and $48.8 million, respectively, above the minimum capital required to be considered well capitalized under the prompt corrective action provision of current banking regulations.
Availability of Filings
A copy of the Company's Form 10-Q for the quarter ended September 30, 2014 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, 2014 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 Lackawanna, Luzerne, and Wayne Counties in Northeastern Pennsylvania. 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. For more information about FNCB, visit www.fncb.com.
INVESTOR CONTACT:
James M. Bone, Jr., CPA
Executive Vice President and
Chief Financial Officer
First National Community Bank
(570) 348-6419
[email protected]
The Company may from time to time make written or oral "forward-looking statements," including statements contained in the Company's filings with the Securities and Exchange Commission ("SEC"), in its reports to shareholders, and in other communications by the Company, which are made in good faith by the Company pursuant to the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995.
These forward-looking statements include statements with respect to the Company'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 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. The following factors, among others, could cause the Company'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 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 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 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 SEC.
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 report, 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 report.
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, 2013.
SOURCE First National Community Bancorp, Inc.
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