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First National Community Bancorp, Inc. Reports 110% Increase in 2014 Earnings


DUNMORE, Pa., March 13, 2015 /PRNewswire/ -- First National Community Bancorp, Inc. (OTCQX: FNCB), the parent company of Dunmore-based First National Community Bank (the "Bank"), today reported operating results for the year ended December 31, 2014 of $13.4 million or $0.81 per basic and diluted share, an increase of $7.0 million, or 110.3%, compared to $6.4 million, or $0.39 per basic and diluted share, for the year ended December 31, 2013. The strong earnings performance was due largely to higher net interest and non-interest income, coupled with a decrease in non-interest expense. Return on average assets and return on average shareholders' equity equaled 1.38% and 29.50%, respectively in 2014, compared to 0.67% and 18.65%, respectively, in 2013. For the fourth quarter of 2014, the Company recorded a loss of $31 thousand, or $0.00 per diluted common share, compared to net income of $2.0 million, or $0.13 per diluted share, for the same quarter of 2013. For the three months ended December 31, 2014, return on average assets and return on average shareholders' equity were (0.01)% and (0.24)%, respectively, compared to 0.83% and 24.30%, respectively, for the same three months of 2013. The change in fourth quarter earnings primarily reflected a decrease in the credit for loan and lease losses, coupled with an accrual totaling $1.5 million related to previously disclosed, one-time penalties assessed by regulatory authorities related to events in the Company's distant past.

Performance Highlights:

  • The Bank continued to exceed all regulatory capital levels mandated by the OCC Consent Order at December 31, 2014.
  • Satisfied all deferred interest on the Company's junior subordinated debentures.
  • Grew net interest income by 2.9% over 2013.
  • Non-interest expense decreased $1.4 million, or 3.9% from 2013.
  • Experienced solid net loan growth for 2014 of 4.6%.
  • Posted net recoveries for second consecutive year of $3.4 million in 2014 and $1.7 million in 2013.
  • Continued asset quality improvement as evidenced by decreases of 13.4% in non-performing loans and 46.9% in other real estate owned compared to December 31, 2013.
  • Tangible book value improved 54.2% to $3.10 per share at December 31, 2014 compared to $2.09 per share at December 31, 2013.

"The year-to-date performance reflected our on-going commitment to implement sound balance sheet management strategies designed to improve the Company's risk profile, as well as promote prudent organic loan generation. In addition, focused asset recovery efforts and effective cost reduction initiatives favorably impacted our overall earnings performance," stated Steven R. Tokach, President and Chief Executive Officer. "Despite having to overcome several hurdles in the fourth quarter, we are encouraged by this year's results. The successes achieved in 2014, coupled with the Company's achievements over the past two years, have led to improved core profitability, a stronger capital base and a well-structured balance sheet. The Company remains focused on our customers and creating long-term value for our shareholders. We believe FNCB is well positioned to be able to compete and take advantage of potential growth opportunities within its market area," concluded Mr. Tokach.

Summary Results for 2014

Net interest income before the credit for loan and lease losses increased $749 thousand, or 2.9%, to $26.5 million in 2014 from $25.8 million in 2013. The increase was primarily a result of lower interest expense on deposits and borrowed funds, coupled with a greater amount of interest and dividend income on securities. Despite the increase in net interest income, the tax-equivalent margin decreased 13 basis points to 3.08% in 2014 from 3.21% in 2013. The margin contraction reflected repositioning of the Company's investment securities portfolio from tax-free to taxable securities as part of tax planning strategies, and a 27 basis point decrease in the tax-equivalent yield on the loan portfolio, partially offset by the positive effects of $29.9 million in average loan growth. Interest expense for the year ended December 31, 2014 decreased $1.0 million, or 14.3%, compared to 2013. The cost of funds decreased 14 basis points to 0.80% in 2014, compared to 0.94% in 2013, which primarily reflected the planned replacement of higher-costing maturing certificates of deposit with lower-costing Federal Home Loan Bank advances.  

Non-interest income increased $5.6 million to $14.9 million in 2014 from $9.3 million in 2013. The 60.7% increase was due largely to an increase in net gains on the sale of investment securities of $3.7 million. Also impacting the increase in non-interest income were $1.8 million received from legal settlements representing satisfaction for past due interest, late charges and legal and other expenses related to previously charged-off commercial real estate loans, and a $0.6 million gain from a divestiture of retail banking operations in Monroe County.

Non-interest expense levels were positively impacted by an improved risk profile, the resolution of long-standing litigation, payments from legal settlements and cost containment initiatives, which were the primary factors leading to a $1.4 million, or 3.9%, reduction in non-interest expense to $33.6 million in 2014 from $34.9 million in 2013. The improvement in the Company's risk profile directly led to reductions of $0.7 million, or 28.4%, and $0.2 million, or 19.3%, in regulatory assessments and insurance costs, respectively. In addition, the resolution of long-standing litigation and regulatory matters and the receipt of the legal settlement resulted in decreases in legal expense of $0.7 million, or 27.7% and loan collection $0.4 million, or 81.3%. The Company also experienced lower employee-related expenses, occupancy costs and other operating expenses which reflected on-going management initiatives directed at cost containment. Partially offsetting the positive factors was a $1.9 million, or 257.3%, increase in expenses associated with OREO properties. The Company recorded valuation adjustments to several properties totaling $2.2 million, which reflected the continued decline in property values in Monroe County, Pennsylvania. In addition, the Company adjusted four properties to liquidation value because they were approaching the five-year regulatory holding period threshold.

The Company recorded penalties in the amounts of $175 thousand related to a settlement it reached with the SEC and an aggregate $1.5 million related to settlements it reached with the OCC and FinCEN. These penalties were included in non-interest expense.

Improved Asset Quality

The Company's asset quality ratios continued to improve in 2014 and remain favorable as compared to our peers, reflecting our continued focus on aggressive problem credit resolutions and commitment to disciplined credit risk management. The Company recorded net recoveries of previously charged-off loans for the second consecutive year. Net recoveries totaled $3.4 million in 2014 and $1.7 million in 2013.

The Bank received a substantial legal settlement during the second quarter of 2014 in the amount of $5.8 million resulting from judgments filed by the Bank pursuant to a large credit relationship. Of the total amount received, $3.6 million represented a full recovery of previously charged-off loans, which was the primary factor that led to the $5.9 million credit for loan and lease losses recorded in 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 and non-interest expense.  

Total non-performing loans were $5.5 million at December 31, 2014, a decrease of $0.9 million, or 13.4%, from December 31, 2013. The ratio of non-performing loans to total loans improved to 0.82% at December 31, 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 December 31, 2014, was 1.06%). The allowance for loan and lease losses as a percentage of total loans was 1.72%. (The above described FDIC peer group average at December 31, 2014 was 1.44%).  The Bank had an annualized ratio of net recoveries to average loans outstanding for the year ended December 31, 2014 of 0.51%, due to the previously mentioned commercial real estate loan recoveries totaling $3.6 million. (The average net charge-offs to average loans outstanding for the FDIC peer group at December 31, 2014 was 0.18%).  

Financial Position

Total assets decreased $33.8 million, or 3.4%, to $970.0 million at December 31, 2014 from $1.0 billion at December 31, 2013. The Company's net loans increased $28.9 million, or 4.6%, which reflected strong demand for both commercial and consumer loan products. In addition, available-for-sale securities increased $15.1 million, or 7.4%. Total deposits decreased $89.4 million, or 10.1%, to $795.3 million at December 31, 2014 from $884.7 million at the end of 2013. Specifically, non-interest-bearing demand deposits decreased $33.5 million, or 21.3%, while interest-bearing deposits decreased $55.9 million, or 7.7%. The changes primarily reflected the balance fluctuations of several large commercial customer relationships and the expected runoff of $47.8 million in certificates of deposit generated through a national CD listing service. Due to favorable rates as compared to other funding sources, the Company utilized FHLB borrowings as an alternative funding source of liquidity, which led to a $34.1 million, or 54.6%, increase in total borrowed funds.

The Company requested and received approval from the Federal Reserve Bank of Philadelphia to cure the interest deferral on its junior subordinated debentures. The Company had been deferring interest since September 14, 2010. On December 15, 2014, the Company paid all deferred and currently payable accrued interest totaling $921 thousand. Subsequently, the Company requested and received approval to pay the regular interest payment due on March 16, 2015, which it intends to do.

Total shareholders' equity improved $17.8 million or 53.1% to $51.4 million at December 31, 2014 from $33.6 million at the end of 2013.  Net income of $13.4 million, coupled with $4.2 million in other comprehensive income related entirely to appreciation of the Company's available-for-sale securities, accounted for the majority of the capital improvement.

At December 31, 2014, First National Community Bank's (the "Bank") regulatory capital ratios continued to exceed the OCC Consent Order mandated minimums of total risk-based capital of 13.0% and Tier 1 leverage ratio of 9.0%. Specifically, the total risk-based capital ratio and the Tier 1 leverage ratio for the Bank were 15.42% and 9.78%, respectively, at December 31, 2014. The capital ratios at December 31, 2014 represent excess capital dollars of $16.5 million and $7.7 million, respectfully, above the OCC Consent Order mandated minimums.

Market for Common Stock

Effective February 17, 2015, the Company's common stock began trading on the OTCQX Marketplace operated by the OTC Markets Group, under the symbol "FNCB."

Availability of Filings

A copy of the Company's Annual Report on Form 10-K for the year ended December 31, 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 2014 Annual Report on Form 10-K is also available on the Investor Relations page of the Company's website,, 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

James M. Bone, Jr., CPA
Executive Vice President and
Chief Financial Officer
First National Community Bank
(570) 348-6419

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, 2014.

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SOURCE First National Community Bancorp, Inc.

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