U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the quarterly period ended March 31, 2000
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from _____________ to _____________
Commission File No.____________
First National Community Bancorp, Inc.
(Exact Name of Registrant as Specified in Its Charter)
Pennsylvania 23-2900790
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
102 E. Drinker St. Dunmore, PA 18512
(Address of Principal Executive Offices)
(717) 346-7667
(Registrant's Telephone Number, Including Area Code)
(Former Name, Former Address and Former Fiscal Year,
if Changed Since Last Report)
Indicate by check whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
YES X NO
---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of the latest practicable date:
Common Stock, $1.25 par value
(Title of Class)
2,500,110 shares
(Outstanding at April 14, 2000)
FIRST NATIONAL COMMUNITY BANCORP, INC.
INDEX
Page No.
Part I - Consolidated Financial Statements
Item 1. Consolidated Financial Statements
Consolidated Statements of Financial Condition
March 31, 2000 and December 31, 1999 1
Consolidated Statements of Income
Three Months Ended March 31, 2000 and 1999
YTD Ended March 31, 2000 and 1999 2
Consolidated Statements of Cash Flows
Three Months Ended March 31, 2000 and 1999 3-4
Consolidated Statements of Changes in Stockholders' Equity
Three Months Ended March 31, 2000 5
Notes to Consolidated Financial Statements 6-7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 7-18
Part II - Other Information: 19
Item 1. Legal Proceedings
Item 2. Changes in Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
Signatures 20
(ii)
FIRST NATIONAL COMMUNITY BANCORP, INC.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Dollars in thousands)
March 31, Dec. 31,
2000 1999
--------- --------
(UNAUDITED) (AUDITED)
ASSETS
Cash and cash equivalents:
Cash and due from banks $ 10,152 $ 15,971
Federal funds sold 0 0
--------- --------
Total cash and cash equivalents 10,152 15,971
Interest-bearing balances
with financial institutions 2,874 2,874
Securities:
Available-for-sale, at fair value 146,498 136,393
Held-to-maturity, at cost
(fair value $1,897 on March 31, 2000
and $1,809 on December 31, 1999) 2,233 2,199
Federal Reserve Bank and FHLB stock, at cost 8,033 7,936
Net loans 373,413 359,244
Bank premises and equipment 4,956 4,825
Other assets 11,414 10,921
-------- --------
Total Assets $559,573 $540,363
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Deposits:
Demand - non-interest bearing $ 41,116 $ 42,535
Interest bearing demand 72,602 64,483
Savings 44,197 43,502
Time ($100,000 and over) 78,244 70,931
Other time 185,231 189,675
-------- --------
Total deposits 421,390 411,126
Borrowed funds 95,099 88,173
Other liabilities 4,471 4,009
-------- --------
Total Liabilities $520,960 $503,308
-------- --------
Shareholders' equity:
Common Stock, $1.25 par value,
authorized 5,000,000 shares;
2,500,110 shares issued and
outstanding at March 31, 2000
and 2,493,507 shares issued and
outstanding at December 31, 1999 $ 3,125 $ 3,117
Additional Paid-in Capital 10,049 9,841
Retained Earnings 29,450 28,349
Accumulated Other Comprehensive Income (4,011) (4,252)
-------- --------
Total shareholders' equity $ 38,613 $ 37,055
-------- --------
Total Liabilities and Shareholders' Equity $559,573 $540,363
======== ========
Note: The balance sheet at December 31, 1999 has been derived from the audited
financial statements at that date but does not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements.
See notes to financial statements
(1)
FIRST NATIONAL COMMUNITY BANCORP, INC.
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(Dollars in thousands, except per share amounts)
Three Months Ending Year-to-Date
March 31, March 31, March 31, March 31,
2000 1999 2000 1999
---------- ---------- ---------- ----------
Interest Income:
Loans $ 7,594 $ 6,794 $ 7,594 $ 6,794
Balances with banks 46 33 46 33
Investments 2,520 1,964 2,520 1,964
Federal Funds Sold 11 69 11 69
------- ------- ------- -------
Total interest income 10,171 8,860 10,171 8,860
------- ------- ------- -------
Interest Expense:
Deposits 4,248 3,912 4,248 3,912
Borrowed Funds 1,324 966 1,324 966
------- ------- ------- -------
Total interest expense 5,572 4,878 5,572 4,878
------- ------- ------- -------
Net Interest Income
before Loan Loss Provision 4,599 3,982 4,599 3,982
Provision for loan losses 180 180 180 180
------- ------- ------- -------
Net interest income 4,419 3,802 4,419 3,802
------- ------- ------- -------
Other Income:
Service charges 217 193 217 193
Other Income 119 110 119 110
Gain (Loss) on sale of:
Securities (10) 213 (10) 213
------- ------- ------- -------
Total other income 326 516 326 516
------- ------- ------- -------
Other expenses:
Salaries & benefits 1,446 1,323 1,446 1,323
Occupancy & equipment 485 435 485 435
Other 877 851 877 851
------- ------- ------- -------
Total other expenses 2,808 2,609 2,808 2,609
------- ------- ------- -------
Income before income taxes 1,937 1,709 1,937 1,709
Income tax expense 413 393 413 393
------- ------- ------- -------
NET INCOME $ 1,524 $ 1,316 $ 1,524 $ 1,316
======= ======= ======= =======
Basic earnings per share (1) $ 0.61 $ 0.55 $ 0.61 $ 0.55
======= ======= ======= =======
Weighted average
number of shares (1) 2,494,741 2,398,360 2,494,741 2,398,360
========= ========= ========= =========
See notes to financial statements
(2)
FIRST NATIONAL COMMUNITY BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 2000 AND 1999
(UNAUDITED)
March 31, March 31,
2000 1999
--------- ---------
(Dollars in thousands)
INCREASE (DECREASE) IN CASH EQUIVALENTS:
Cash Flows From Operating Activities:
Interest Received $ 9,699 $ 8,728
Fees & Commissions Received 336 303
Interest Paid (5,646) (4,865)
Income Taxes Paid (53) 0
Cash Paid to Suppliers & Employees (2,626) (2,501)
-------- --------
Net Cash Provided (Used) by Operating
Activities $ 1,710 $ 1,665
-------- --------
Cash Flows from Investing Activities:
Securities available for sale:
Proceeds from Maturities $ 0 $ 500
Proceeds from Sales prior to maturity 5,971 18,260
Proceeds from Calls prior to maturity 2,066 8,139
Purchases (17,864) (30,743)
Securities held to maturity:
Proceeds from Calls prior to maturity 0 249
Purchases 0 (1,622)
Net (Increase) Decrease in
Interest-Bearing Bank Balances 0 0
Net (Increase) Decrease in Loans to Customers (14,349) (23,923)
Capital Expenditures (336) (363)
-------- --------
Net Cash Provided (Used) by Investing
Activities $(24,512) $(29,503)
-------- --------
Cash Flows from Financing Activities:
Net Increase (Decrease) in Demand Deposits,
Money Market Demand, NOW Accounts,
and Savings Accounts $ 7,395 $ 12,553
Net Increase in Certificates of Deposit 2,869 1,115
Net Increase in Borrowed Funds 6,926 11,903
Net Proceeds from Issuance of Common Stock
Through Dividend Reinvestment 216 0
Dividends Paid (423) (359)
-------- --------
Net Cash Provided (Used) by Financing
Activities $ 16,983 $ 25,212
-------- --------
Net Increase (Decrease) in Cash and
Cash Equivalents $ (5,819) $ (2,626)
Cash & Cash Equivalents at Beginning of Year $ 15,971 $ 13,459
-------- --------
CASH & CASH EQUIVALENTS AT END OF PERIOD $ 10,152 $ 10,833
======== ========
(Continued)
(3)
FIRST NATIONAL COMMUNITY BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOW (CONTINUED)
THREE MONTHS ENDED MARCH 31, 2000 AND 1999
2000 1999
-------- --------
(Dollars in thousands)
RECONCILIATION OF NET INCOME TO NET CASH
PROVIDED BY OPERATING ACTIVITIES:
Net Income $ 1,524 $ 1,316
------- -------
Adjustments to Reconcile Net Income to
Net Cash Provided by Operating Activities:
Amortization (Accretion), Net (54) 38
Depreciation 205 188
Provision for Probable Credit Losses 180 180
Loss (Gain) on Sale of Investment Securities 10 (213)
Increase (Decrease) in Taxes Payable 360 393
Decrease (Increase) in Interest Receivable (418) (170)
Increase (Decrease) in Interest Payable (74) 12
Decrease (Increase) in Prepaid Expenses
and Other Assets (198) (413)
Increase (Decrease) in Accrued Expenses
and Other Liabilities 175 334
------- -------
Total Adjustments $ 186 $ 349
------- -------
NET CASH PROVIDED (USED) BY OPERATING
ACTIVITIES $ 1,710 $ 1,665
======= =======
See notes to financial statements
(4)
FIRST NATIONAL COMMUNITY BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN
STOCKHOLDERS' EQUITY
For The Three Months Ended March 31, 2000
(In thousands, except share data)
(UNAUDITED)
ACCUM-
ULATED
OTHER
COMP COMP
REHEN- COMMON STOCK ADD'L REHEN-
SIVE --------------------- PAID-IN RETAINED SIVE
INCOME SHARES AMOUNT CAPITAL EARNINGS INCOME TOTAL
----------------------------------------------------------------------------------------
BALANCES, DECEMBER 31, 1999 2,493,507 $3,117 $9,841 $28,349 $(4,252) $37,055
Comprehensive Income:
Net income for the period 1,524 1,524 1,524
Other comprehensive income, net
of tax:
Unrealized gain on securities
available-for-sale, net of
deferred income taxes of $124 251
Reclassification adjustment (10)
------
Total other comprehensive
income, net of tax 241 241 241
------
Comprehensive Income 1,765
Issuance of Common Stock through
Dividend Reinvestment 6,603 8 208 216
Cash dividends paid, $0.17 per share (423) (423)
--------- ------ ------- ------- ------- -------
BALANCES, MARCH 31, 2000 2,500,110 $3,125 $10,049 $29,450 $(4,011) $38,613
========= ====== ======= ======= ======= =======
See notes to financial statements
(5)
FIRST NATIONAL COMMUNITY BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) The accounting and financial reporting policies of First National Community
Bancorp, Inc. and its subsidiary conform to generally accepted accounting
principles and to general practice within the banking industry. The
consolidated statements include the accounts of First National Community
Bancorp, Inc. and its wholly owned subsidiary, First National Community
Bank (Bank) including its subsidiary, FNCB Realty, Inc. (collectively,
Company). All material intercompany accounts and transactions have been
eliminated in consolidation. The accompanying interim financial statements
are unaudited. In management's opinion, the consolidated financial
statements reflect a fair presentation of the consolidated financial
position of First National Community Bancorp, Inc. and subsidiary, and the
results of its operations and its cash flows for the interim periods
presented, in conformity with generally accepted accounting principles.
These interim financial statements should be read in conjunction with the
audited financial statements and footnote disclosures in the Bank's Annual
Report to Shareholders for the fiscal year ended December 31, 1999.
(2) Basic earnings per share have been computed by dividing net income (the
numerator) by the weighted average number of common shares (the
denominator) for the period. Such shares amounted to 2,494,741 and
2,398,360 for the periods ending March 31, 2000 and 1999, respectively.
(3) In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of
an Enterprise and Related Information." SFAS No. 131 requires that public
companies report certain information about operating segments in complete
sets of financial statements of the company and in condensed financial
statements of interim periods issued to shareholders. It also requires that
public companies report certain information about their products and
services, the geographic areas in which they operate, and their major
customers. SFAS No. 131 applies to fiscal years beginning after December
15, 1997.
FirstNational Community Bancorp, Inc. is a one bank holding company operating
primarily in northeastern Pennsylvania. The primary purpose of the company
is the delivery of financial services within its market by means of a
branch network located in Lackawanna and Luzerne counties. Each of the
company's entities are part of the same reporting segment, whose operating
results are regularly reviewed by management. Therefore, consolidated
financial statements, as presented, fairly reflect the operating results of
the financial services segment of our business.
(4) In June 1997, FASB issued SFAS No. 130, "Reporting Comprehensive Income"
("SFAS 130"). SFAS 130 established standards for reporting and display of
comprehensive income and its components in the financial statements. SFAS
130 applies to fiscal years beginning after December 15, 1997.
Reclassification of financial statements for earlier periods has been
provided for comparative purposes. The adoption of SFAS 130 had no impact
on the company's consolidated results of operations, financial position or
cash flows.
(5) During 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities" ("SFAS 133"), which establishes
accounting and reporting standards for derivative instruments and for
hedging activities. The statement requires that all derivatives be
recognized as either assets or liabilities in the statement of financial
position and be measured at fair value. SFAS
(6)
133 is effective for fiscal quarters of all fiscal years beginning after
June 15, 1999; earlier application is permitted. The company does not hold
or issue derivative instruments as defined by SFAS 133; and accordingly, it
is the opinion of management that there will be no future impact from this
recent accounting standard.
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The consolidated financial review of First National Community Bancorp, Inc. (the
"company") provides a comparison of the performance of the company for the
periods ended March 31, 2000 and 1999. The financial information presented
should be reviewed in conjunction with the consolidated financial statements and
accompanying notes appearing elsewhere in this report.
Background
First National Community Bancorp, Inc. (the company) is a Pennsylvania
Corporation, incorporated in 1997 and is registered as a bank holding company
under the Bank Holding Company Act of 1956, as amended. The company became an
active bank holding company on July 1, 1998 when it assumed ownership of First
National Community Bank (the bank). The bank is a wholly-owned subsidiary of the
company.
The company's primary activity consists of owning and operating the bank,
which provides the customary retail and commercial banking services to
individuals and businesses. The bank provides practically all of the company's
earnings as a result of its banking services. The company operates 9
full-service branch banking offices in its principal market area in Lackawanna
and Luzerne Counties. At March 31, 2000, the company had 166 full-time
equivalent employees.
The bank was established as a national banking association in 1910 as "The
First National Bank of Dunmore." Based upon shareholder approval received at a
Special Shareholders' Meeting held October 27, 1987, the bank changed its name
to "First National Community Bank" effective March 1, 1988. The bank's
operations are conducted from offices located in Lackawanna and Luzerne
Counties, Pennsylvania:
- the Main Office in Dunmore
- the downtown Scranton Office established in 1980
- the Dickson City Office opened in December 1984
- the Fashion Mall Office, Scranton/Carbondale Highway opened in July 1988
- the Wilkes-Barre Office which opened in July 1993
- the Pittston Office which opened in April 1995
- the Kingston Office which opened in August 1996
- the Exeter Office which opened in November 1998
- the Daleville Office which opened in April 2000.
(7)
The bank provides the usual commercial banking services to individuals and
businesses, including a wide variety of loan and deposit instruments. As a
result of the bank's partnership with INVEST, our customers are able to access
alternative products such as mutual funds, bonds, equities and annuities
directly from our INVEST representatives.
During 1996, FNCB Realty Inc. was formed as a wholly owned subsidiary of
the Bank to manage, operate and liquidate properties acquired through
foreclosure.
Summary:
- -------
Net income for the three months ended March 31, 2000 amounted to
$1,524,000, an increase of $208,000 or 16% compared to the same period of the
previous year. This increase can be attributed to a $617,000 improvement in net
interest income. Earnings from securities sales decreased $223,000. Non-interest
expenses increased $199,000, or 8%, over the same period of last year due
primarily to an increase in salaries & benefits. Operating income for the same
period, after excluding the effect of asset sales and loan loss provisions,
increased $431,000 or 34%.
RESULTS OF OPERATIONS Net Interest Income:
The Company's primary source of revenue is net interest income which
totaled $4,599,000 and $3,982,000 for the first three months of 2000 and 1999,
respectively. Year to date net interest margins (tax equivalent) increased
fifteen basis points from 3.58% reported in 1999 to 3.73% comprised of a
twenty-four basis point increase in the yield earned on earning assets and a
twelve basis point increase in the cost of interest-bearing liabilities.
Earning assets increased $24 million to $543 million during the first three
months of 2000 and now total 97.1% of total assets, an increase from the
year-end level of 96.1%.
(8)
Yield/Cost Analysis
The following tables set forth certain information relating to the
Company's Statement of Financial Condition and reflect the weighted average
yield on assets and weighted average costs of liabilities for the periods
indicated. Such yields and costs are derived by dividing the annualized income
or expense by the weighted average balance of assets or liabilities,
respectively, for the periods shown:
Three-months ended March 31, 2000
---------------------------------
Average Yield/
Balance Interest Cost
------- -------- -----
(Dollars in thousands)
Assets:
Interest-earning assets:
Loans (taxable) $356,774 $ 7,391 8.24%
Loans (tax-free) (1) 12,873 203 9.47
Investment securities (taxable) 114,772 1,946 6.78
Investment securities (tax-free)(1) 42,244 574 8.23
Time deposits with banks and
federal funds sold 3,668 57 6.19
-------- --------- ----
Total interest-earning assets 530,331 10,171 7.94%
Non-interest earning assets 17,409
--------
Total Assets $547,740
========
Liabilities and Shareholders' Equity:
Interest-bearing liabilities:
Deposits $373,500 $ 4,248 4.57%
Borrowed funds 90,496 1,324 5.79
-------- ------- ----
Total interest-bearing liabilities 463,996 5,572 4.81%
-------- -------
Other liabilities and shareholders' equity 90,496
--------
Total Liabilities and Shareholders' Equity $547,740
========
Net interest income/rate spread $ 4,599 3.13%
Net yield on average interest-
earning assets 3.73%
Interest-earning assets as a
percentage of interest-
bearing liabilities 114%
(1) Yields on tax-exempt loans and investment securities have been computed on a
tax equivalent basis.
(9)
Three-months ended March 31, 1999
---------------------------------
Average Yield/
Balance Interest Cost
------- -------- ------
(Dollars in thousands)
Assets:
Interest-earning assets:
Loans (taxable) $328,280 $ 6,605 8.08%
Loans (tax-free) (1) 12,758 189 8.97
Investment securities (taxable) 95,749 1,499 6.26
Investment securities (tax-free) (1) 33,970 465 8.30
Time deposits with banks and
federal funds sold 8,325 102 4.95
-------- ------- ----
Total interest-earning assets 479,082 8,860 7.70%
-------- -------
Non-interest earning assets 20,292
--------
Total Assets $499,374
========
Liabilities and Shareholders' Equity:
Interest-bearing liabilities:
Deposits $351,348 $ 3,912 4.52%
Borrowed funds 69,303 966 5.57
-------- ------- ----
Total interest-bearing liabilities 420,651 4,878 4.69%
-------- -------
Other liabilities and shareholders' equity 78,723
--------
Total Liabilities and Shareholders' Equity $499,374
========
Net interest income/rate spread $ 3,982 3.01%
Net yield on average interest-
earning assets 3.58%
Interest-earning assets as a
percentage of interest-
bearing liabilities 114%
(1) Yields on tax-exempt loans and investment securities have been computed on a
tax equivalent basis.
(10)
Rate Volume Analysis
The table below sets forth certain information regarding the changes in the
components of net interest income for the periods indicated. For each category
of interest earning asset and interest bearing liability, information is
provided on changes attributed to: (1) changes in rate (change in rate
multiplied by current volume); (2) changes in volume (change in volume
multiplied by old rate); (3) the total. The net change attributable to the
combined impact of volume and rate has been allocated proportionately to the
change due to volume and the change due to rate.
Period Ended March 31,
(Dollars in thousands)
2000 vs 1999
Increase (Decrease)
Due to
Rate Volume Total
---- ------ -------
Loans (taxable) $232 $554 $ 786
Loans (tax-free) 12 2 14
Investment securities (taxable) 150 297 447
Investment securities (tax-free) (4) 113 109
Time deposits with banks and
federal funds sold 9 (54) (45)
---- ---- ------
Total interest income $399 $912 $1,311
---- ---- ------
Deposits $128 $208 $ 336
Borrowed funds 63 295 358
---- ---- ------
Total interest expense $191 $503 $ 694
---- ---- ------
Net change in net interest income $208 $409 $ 617
==== ==== ======
Period Ended March 31,
(Dollars in thousands)
1999 vs 1998
Increase (Decrease)
Due to
Rate Volume Total
---- ------ -------
Loans (taxable) $(482) $1,221 $ 739
Loans (tax-free) (2) (36) (38)
Investment securities (taxable) (81) 71 (10)
Investment securities (tax-free) (25) 103 78
Time deposits with banks and
federal funds sold (15) 13 (2)
----- ------ -----
Total interest income $(605) $1,372 $ 767
----- ------ -----
Deposits $(183) $ 418 $ 235
Borrowed funds (57) 313 256
----- ------ -----
Total interest expense $(240) $ 731 $ 491
----- ------ -----
Net change in net interest income $(365) $ 641 $ 276
===== ====== =====
(11)
Other Income and Expenses:
- -------------------------
Other income in the first three months of 2000 decreased $190,000 in
comparison to the same period of 1999. This decrease can be attributed to the
$223,000 decrease in the gain on the sale of securities. Excluding income from
asset sales, other income increased $33,000 or 11%, during the first three
months of 2000 as compared to the same period of last year. Income from service
charges increased $24,000, or 12%, in comparison to the same period of last year
while other fee income increased $9,000, or 8%.
Other expenses increased $199,000 or 8% for the period ended March 31, 2000
compared to the same period of the previous year. Salaries and Benefits costs
account for a majority of the increase, adding $123,000, or 9% in comparison to
the first three months of 1999. Occupancy and equipment costs rose 11% while
other operating expenses increased $26,000, or 3%.
Other Comprehensive Income:
- --------------------------
The Company's other comprehensive income includes unrealized holding gains
(losses) on securities which it has classified as available-for-sale in
accordance with FASB 115, "Accounting for Certain Investments in Debt and Equity
Securities."
Provision for Income Taxes:
- --------------------------
The provision for income taxes is calculated based on annualized taxable
income. The provision for income taxes differs from the amount of income tax
determined applying the applicable U.S. statutory federal income tax rate to
pre-tax income from continuing operations as a result of the following
differences:
2000 1999
------ ------
Provision at statutory rate $663 $582
Add (Deduct):
Tax effect of non-taxable interest income (264) (222)
Non-deductible interest expense 38 31
Other items, net (24) 2
---- ----
Income tax expense $413 $393
==== ====
(12)
Securities:
Carrying amounts and approximate fair value of investment securities are
summarized as follows:
March 31, 2000 December 31, 1999
-------------- -----------------
Carrying Fair Carrying Fair
Amount Value Amount Value
-------- ------ -------- ------
(Dollars in thousands)
U.S. Treasury securities and
obligations of U.S.
government agencies $ 21,501 $ 21,360 $ 20,785 $ 20,629
Obligations of state &
political subdivisions 43,194 42,999 39,097 38,863
Mortgage-backed securities 82,552 82,552 77,763 77,763
Corporate debt securities 1,484 1,484 937 937
Equity securities 8,033 8,033 7,946 7,946
-------- -------- -------- --------
Total $156,764 $156,428 $146,528 $146,138
======== ======== ======== ========
The following summarizes the amortized cost, approximate fair value, gross
unrealized holding gains, and gross unrealized holding losses at March 31, 2000
of the Company's Investment Securities classified as available-for-sale:
March 31, 2000
----------------------------------
(Dollars in thousands)
Gross Gross
Unrealized Unrealized
Amortized Holding Holding Fair
Cost Gains Losses Value
--------- ---------- ---------- -------
U.S. Treasury securities and
obligations of U.S.
government agencies: $ 21,244 $ 7 $ 807 $20,444
Obligations of state and
political subdivisions: 43,289 357 1,628 42,018
Mortgage-backed securities: 86,505 165 4,118 82,552
Corporate debt securities: 1,539 9 64 1,484
Equity securities: 8,033 0 0 8,033
-------- ---- ------ -------
Total $160,610 $538 $6,617 $154,531
======== ==== ====== ========
(13)
The following summarizes the amortized cost, approximate fair value, gross
unrealized holding gains, and gross unrealized holding losses at March 31, 2000
of the Company's Investment Securities classified as held-to-maturity:
March 31, 2000
-------------------------------------------
(Dollars in thousands)
Gross Gross
Unrealized Unrealized
Amortized Holding Holding Fair
Cost Gains Losses Value
--------- --------- ---------- ------
U.S. Treasury securities and
obligations of U.S.
government agencies: $1,056 $ 0 $140 $ 916
Obligations of state and
political subdivisions: 1,177 0 196 981
Mortgage-backed securities: 0 0 0 0
Corporate debt securities: 0 0 0 0
Equity securities: 0 0 0 0
------ --- ---- ------
Total $2,233 $ 0 $336 $1,897
====== === ==== ======
The following table shows the amortized cost and approximate fair value of
the company's debt securities at March 31, 2000 using contractual maturities.
Expected maturities will differ from contractual maturity because issuers may
have the right to call or prepay obligations with or without call or prepayment
penalties.
Available-for sale Held-to-maturity
------------------------ ------------------------
Amortized Fair Amortized Fair
Cost Value Cost Value
--------- ------ --------- -----
(Dollars in Thousands) (Dollars in Thousands)
Amounts maturing in:
One year or less $ 0 $ 0 $ 0 $ 0
After one year through
five years 4,127 4,109 0 0
After five years through
ten years 18,855 18,503 0 0
After ten years 43,090 41,334 2,233 1,897
Mortgage-backed securities 86,505 82,552 0 0
-------- -------- ------ ------
Total $152,577 $146,498 $2,233 $1,897
======== ======== ====== ======
Gross proceeds from the sale of investment securities for the periods ended
March 31, 2000 and 1999 were $5,970,925 and $18,259,633 respectively with the
gross realized gains being $2,401 and $219,060 respectively, and gross realized
losses being $12,404 and $5,869, respectively.
At March 31, 2000 and 1999, investment securities with a carrying amount of
$102,675,995 and $72,176,377 respectively, were pledged as collateral to secure
public deposits and for other purposes.
(14)
Loans:
The following table sets forth detailed information concerning the
composition of the company's loan portfolio as of the dates specified:
March 31, 2000 December 31, 1999
------------------ ---------------------
Amount % Amount %
------ ---- ------- -----
(Dollars in thousands)
Real estate loans, secured
by residential properties $ 96,293 25.5 $ 95,339 26.2
Real estate loans, secured
by nonfarm, nonresidential
properties 137,755 36.4 134,690 37.0
Commercial & industrial loans 65,211 17.2 61,337 16.9
Loans to individuals for
household,family and other
personal expenditures 66,182 17.5 65,075 17.9
Loans to state and political
subdivisions 12,736 3.4 7,389 2.0
All other loans,
including overdrafts 99 0.0 128 0.0
-------- ----- -------- -----
Total Gross Loans $378,276 100.0 $363,958 100.0
----- -----
Less: Allow. for Loan Losses (4,863) (4,714)
-------- --------
Net Loans $373,413 $359,244
======== ========
The following table sets forth certain information with respect to the
company's allowance for loan losses and charge-offs:
Period Ended
March 31, Dec 31,
2000 1999
--------- -------
(Dollars in thousands)
Balance, January 1 $4,714 $4,283
Recoveries Credited 48 267
Losses Charged 79 856
Provision for Loan Losses 180 1,020
------ ------
Balance at End of Period $4,863 $4,714
====== ======
(15)
The following table presents information about the company's non-performing
assets for the periods indicated:
March 31, 2000 Dec 31, 1999
-------------- ------------
(Dollars in thousands)
Nonaccrual loans
Impaired $ 0 $ 0
Other 702 288
Loans past due 90 days or more
and still accruing 137 498
---- ----
Total non-performing loans 839 786
---- ----
Other Real Estate Owned 0 0
---- ----
Total non-performing assets $839 $786
==== ====
March 31, 2000 Dec 31, 1999
-------------- ------------
Non-performing loans as a
percentage of gross loans 0.2% 0.2%
====== ======
Non-performing assets as a
percentage of total assets 0.1% 0.1%
====== ======
Non-performing assets are comprised of non-accrual loans and loans past due
90 days or more and still accruing, and other real estate owned. Loans are
placed in nonaccrual status when management believes that the collection of
interest or principal is doubtful, or generally when a default of interest or
principal has existed for 90 days or more, unless such loan is fully secured and
in the process of collection. When interest accrual is discontinued, interest
credited to income in the current year is reversed and interest accrued in prior
years is charged against the allowance for credit losses. Any payments received
are applied, first to the outstanding loan amounts, then to the recovery of any
charged-off loan amounts. Any excess is treated as a recovery of lost interest.
Other real estate consists of property acquired through foreclosure. The
property is carried at the lower of cost or the estimated fair value based on an
independent appraisal.
Provision for Credit Losses:
- ---------------------------
The provision for credit losses varies from year to year based on
management's evaluation of the adequacy of the allowance for credit losses in
relation to the risks inherent in the loan portfolio. In its evaluation,
management considers credit quality, changes in loan volume, composition of the
loan portfolio, past experience, delinquency trends, and the economic condition.
Consideration is also given to examinations performed by regulatory authorities
and the Company's independent accountants. A monthly provision of $60,000 was
credited to the allowance for loan losses during the first three months of 2000
and 1999, respectively. The ratio of the loan loss reserve to total loans at
March 31, 2000 and 1999 was 1.29% and 1.22%, respectively.
(16)
Asset/Liability Management, Interest Rate Sensitivity and Inflation
The major objectives of the company's asset and liability management are to
(1) manage exposure to changes in the interest rate environment to achieve a
neutral interest sensitivity position within reasonable ranges, (2) ensure
adequate liquidity and funding, (3) maintain a strong capital base, and (4)
maximize net interest income opportunities. First National Community Bank
manages these objectives through its Senior Management and Asset and Liability
Management Committees. Members of the committees meet regularly to develop
balance sheet strategies affecting the future level of net interest income,
liquidity and capital. Items that are considered in asset and liability
management include balance sheet forecasts, the economic environment, the
anticipated direction of interest rates and the Bank's earnings sensitivity to
changes in these rates.
The company analyzes its interest sensitivity position to manage the risk
associated with interest rate movements through the use of gap analysis and
simulation modeling. Because of the limitations of the gap reports, the bank
uses simulation modeling to project future net interest income streams
incorporating the current "gap" position, the forecasted balance sheet mix, and
the anticipated spread relationships between market rates and bank products
under a variety of interest rate scenarios.
Economic conditions affect financial institutions, as they do other
businesses, in a number of ways. Rising inflation affects all businesses through
increased operating costs but affects banks primarily through the manner in
which they manage their interest sensitive assets and liabilities in a rising
rate environment. Economic recession can also have a material effect on
financial institutions as the assets and liabilities affected by a decrease in
interest rates must be managed in a way that will maximize the largest component
of a bank's income, that being net interest income. Recessionary periods may
also tend to decrease borrowing needs and increase the uncertainty inherent in
the borrowers' ability to pay previously advanced loans. Additionally,
reinvestment of investment portfolio maturities can pose a problem as attractive
rates are not as available. Management closely monitors the interest rate risk
of the balance sheet and the credit risk inherent in the loan portfolio in order
to minimize the effects of fluctuations caused by changes in general economic
conditions.
Liquidity
- ---------
The term liquidity refers to the ability of the company to generate
sufficient amounts of cash to meet its cash-flow needs. Liquidity is required to
fulfill the borrowing needs of the bank's credit customers and the withdrawal
and maturity requirements of its deposit customers, as well as to meet other
financial commitments.
The short-term liquidity position of the company is strong as evidenced by
$10,152,000 in cash and due from banks and $2,874,000 in interest-bearing
balances with banks maturing within one year. A secondary source of liquidity is
provided by the investment portfolio with $3,500,000 or 2% of the portfolio
maturing or expected to be called within one year and expected cash flow from
principal reductions approximating an additional $3,600,000.
(17)
The company has relied primarily on its retail deposits as a source of
funds. The bank is primarily a seller of Federal funds to invest excess cash;
however, the bank can also borrow in the Federal Funds market to meet temporary
liquidity needs. Other sources of potential liquidity include repurchase
agreements, Federal Home Loan Bank advances and the Federal Reserve Discount
Window.
Capital Management
- ------------------
A strong capital base is essential to the continued growth and
profitability of the company and in that regard the maintenance of appropriate
levels of capital is a management priority. The company's principal capital
planning goals are to provide an adequate return to shareholders while retaining
a sufficient base from which to provide for future growth, while at the same
time complying with all regulatory standards. As more fully described in Note 12
to the financial statements, regulatory authorities have prescribed specified
minimum capital ratios as guidelines for determining capital adequacy to help
insure the safety and soundness of financial institutions.
Total stockholders' equity increased $1,558,000 or 4.2% during the first
three months of 2000 comprised of an increase in retained earnings in the amount
of $1,101,000 after paying cash dividends, $216,000 from stock issued through
Dividend Reinvestment and a $241,000 increase in the market value of our
securities available-for-sale. During the same period of 1999, total
stockholders' equity increased $161,000, or 0.5%, comprised of an increase in
retained earnings of $956,000, after paying cash dividends offset by a $795,000
decrease in the market value of our securities available-for-sale. The total
dividend payout during the first three months of 2000 and 1999 represents $.17
per share and $.15 per share, respectively. Excluding the impact due to
securities valuation, increases in core equity amounted to $1,317,000 and
$956,000, respectively.
The Board of Governors of the Federal Reserve System and other various
regulatory agencies have specified guidelines for purposes of evaluating a
bank's capital adequacy. Currently, banks must maintain a leverage ratio of core
capital to total assets at a prescribed level, namely 3%. In addition, bank
regulators have issued risk-based capital guidelines. Under such guidelines,
minimum ratios of core capital and total qualifying capital as a percentage of
risk-weighted assets and certain off-balance sheet items of 4% and 8% are
required. As of March 31, 2000, First National Community Bank met all capital
requirements with a leverage ratio of 7.69% and core capital and total
risk-based capital ratios of 10.59% and 11.80%, respectively.
(18)
Part II Other Information
Item 1 - Legal Proceeding
The Bank is not involved in any material pending legal proceedings, other
than routine litigation incidental to the business.
Item 2 - Changes in Securities
None
Item 3 - Defaults upon Senior Securities
None
Item 4 - Submission of Matters to a Vote of Security Holders
None
Item 5 - Other Information
None
Item 6 - Exhibits and Reports on Form 8 - K
None
(19)
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Registrant: FIRST NATIONAL COMMUNITY BANCORP, INC
Date: April 25, 2000 /s/ J. David Lombardi
-------------------- ----------------------
J. David Lombardi, President/
Chief Executive Officer
Date: April 25, 2000 /s/ William Lance
--------------------- ------------------
William Lance, Treasurer/
Principal Financial Officer
(20)