DUNMORE, Pa., Aug. 11, 2014 /PRNewswire/ -- First National Community Bancorp, Inc. (OTCQB: FNCB), the parent company of Dunmore-based First National Community Bank, today announced a continuation of favorable operating results for the second quarter and six months ended June 30, 2014. The Company reported net income of $6.6 million, or $0.40 per basic and diluted share, for the second quarter of 2014, compared to net income of $720 thousand, or $0.04 per basic and diluted share, for the same quarter of 2013. Net income for the six months ended June 30, 2014, was $10.1 million, or $0.61 per basic and diluted share, compared to net income of $2.5 million, or $0.15 per basic and diluted share, for the comparable period of 2013. The improved performance for the second quarter and six month periods resulted primarily from increases in the credit for loan and lease losses, non-interest income and net interest income, partially offset by an increase in non-interest expense.
- At June 30, 2014, the Bank exceeded all regulatory capital levels mandated by the OCC Consent Order
- Year-to-date annualized return on average equity of 50.62%
- Year-to-date annualized return on average assets of 2.09%
- Net interest income growth of 4.1% for the six months ended June 30, 2014
- Net loan growth of 4.6% for the six months ended June 30, 2014
- A 6 basis point improvement in the second quarter ratio of non-performing loans to total loans to 0.83%, compared to 0.89% at March 31, 2014, and a 16 basis point improvement compared to 0.99% at December 31, 2013
- A 12.9% decrease in non-performing loans from December 31, 2013
- Other real estate owned ("OREO") was reduced by $1.1 million, or 25.1%, compared to December 31, 2013
"Our strong operating performance through the first six months of 2014 reflects the momentum established in 2013, upon which we continue to build," said Steven R. Tokach, President and Chief Executive Officer. "The Company's bottom-line results were substantially improved in comparison to the prior year as a result of stable margins, continued solid asset quality metrics along with our focus on operating cost containment. We continued to effectively build our loan portfolio with 4.6% net loan growth through the midpoint of 2014, and we realized additional success with our efforts to address non-performing loans and other real estate owned. Importantly, at quarter end the Bank was in full compliance with all OCC Consent Order mandatory minimum capital requirements. We believe that we are in a strong financial condition and well positioned to continue to compete for profitable growth opportunities within our Northeastern Pennsylvania service area."
Substantial Recovery on Previously Charged-Off Commercial Loans
During the second quarter of 2014, the Company received a substantial legal settlement in the amount of $5.8 million resulting from judgments filed by the Company pursuant to a large credit relationship. 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 $4.0 million and $4.4 million for the three and six months ended June 30, 2014, respectively. 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 Company. The Company's increase in non-interest income for the second quarter and six months ended June 30, 2014 of $2.7 million and $3.7 million, respectively, resulted primarily from this settlement, coupled with net gains on the sale of investment securities.
Summary Results for the Three and Six Months Ended June 30, 2014
Net interest income before credit for loan and lease losses was $6.7 million for the second quarter, and $13.2 million for the six months ended June 30, 2014 compared to $6.3 million and $12.7 million 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 Bank's second quarter 2014 net interest margin was 3.16%, a decrease of 10 basis points from the prior year period, and an increase of 6 basis points compared to the first quarter of 2014. Interest expense for the three and six months ended June 30, 2014 decreased $268 thousand and $552 thousand, respectively, compared to the same periods in 2013, as a result of an 18 basis-point reduction in the Bank's average cost of funds, coupled with lower average balances of interest-bearing liabilities for both the three and six months ended June 30, 2014.
Non-interest income was $5.0 million and $8.4 million for the three and six months ended June 30, 2014, compared to $2.3 million and $4.7 million for the same periods in 2013. The increase in second quarter 2014 non-interest income was primarily the result of increased net gains on the sale of securities and recoveries related to two legal settlements, one of which was 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 the other was a recovery in connection with the Shareholder Derivative Suit. The increase in non-interest income for the six months ended June 30, 2014, was primarily the result of the legal settlements detailed above, net gains on the sale of securities and a first quarter gain from a divestiture of retail banking operations in Monroe County.
Non-interest expense for the three and six months ended June 30, 2014 was $9.0 million and $17.0 million, respectively, compared to $7.9 million and $16.2 million for the same periods of 2013. The increased non-interest expense for both the three- and six-month periods in 2014 was a result of higher other real estate owned expenses associated with 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. Partially offsetting the increase in non-interest expense were decreases in insurance expenses, regulatory assessments and loan collection expenses, which reflected the Company's improved financial position and asset quality metrics.
Improved Asset Quality
The Bank's asset quality ratios continued to improve through June 30, 2014, reflecting our continued focus on aggressive problem credit resolutions. The Bank recorded net recoveries of $3.7 million for the six months ended June 30, 2014, compared to $1.3 million for the same six months of 2013.
Total non-performing loans were $5.6 million at June 30, 2014, a decrease of $825 thousand, or 12.9%, from December 31, 2013. The ratio of non-performing loans to total loans improved to 0.83% at June 30, 2014, compared to 0.99% at December 31, 2013, a decrease of 16 basis points. (The FDIC average for commercial banks with assets between $300 million and $1 billion at June 30, 2014, was 1.27%). The allowance for loan and lease losses as a percentage of non-accrual loans was 219% at June 30, 2014 compared with 221% at December 31, 2013. (The above described FDIC peer group average was 270% at June 30, 2014). The allowance for loan and lease losses, as a percentage of total loans was 1.82% (The above described FDIC peer group average at June 30, 2014 was 1.55%) The Bank had a ratio of net recoveries to average loans outstanding for the six months ended June 30, 2014 of 0.57%, due to the previously mentioned commercial real estate loans recovery totaling $3.6 million. (The average net charge-offs for the FDIC peer group at June 30, 2014 was 0.16%).
The Company's total assets at June 30, 2014 were $957.9 million compared $1.0 billion at December 31, 2013. Total loans (before allowance for loan and lease losses) at June 30, 2014 were $671.0 million, an increase of $27.1 million compared to December 31, 2013 and up $16.8 million compared to March 31, 2014. Total deposits at June 30, 2014 were $770.2 million, a decrease of $114.5 million from December 31, 2013, reflective of normal seasonal outflows of municipal deposits, the Monroe County retail banking activity divestiture and continued run-off of certificates of deposit in the low interest rate environment. Total borrowed funds were $112.7 million at June 30, 2014 compared to $62.4 million at December 31, 2013.
At June 30, 2014, First National Community Bank's capital ratios were as follows: Total risk-based capital ratio of 14.74%, Tier 1 risk-based capital ratio of 13.48%, and Tier 1 leverage ratio of 9.62%. As of June 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% and Tier 1 leverage ratio of 9%.
Availability of Filings
A copy of the Company's Form 10-Q for the quarter ended June 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 June 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:
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.
James M. Bone, Jr., CPA
Executive Vice President and
Chief Financial Officer
First National Community Bank
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.