FNCB FNCB Bancorp Inc

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FNCB Bancorp, Inc.

PROXY STATEMENT

FOR THE 2023 ANNUAL MEETING OF SHAREHOLDERS,

to be held on May 17, 2023

We intend to mail these proxy materials on or about April 10, 2023 to all shareholders of record entitled to vote at the Annual Meeting.

We will have technicians ready to assist you with any technical difficulties you may have accessing the virtual meeting. If you encounter any difficulties accessing the virtual meeting during the check-in or meeting time, please call the technical support number that will be posted on the virtual shareholder meeting login page.

If, on March 23, 2023, your shares were registered directly in your name with FNCB’s transfer agent, Broadridge Financial Solutions, Inc., then you are a shareholder of record. As a shareholder of record, you may vote at the Annual Meeting or vote by proxy. Whether or not you plan to attend the Annual Meeting, we urge you to fill out and return the enclosed proxy card, or vote by proxy over the telephone or on the internet as instructed below to ensure your vote is counted. If you submit your proxy telephonically or over the internet, you must do so no later than 11:59 p.m. Eastern Daylight Time on May 16, 2023. Shareholders who attend the virtual Annual Meeting should follow the voting instructions at www.virtualshareholdermeeting.com/FNCB2023 to vote online during the Annual Meeting.

If, on March 23, 2023, your shares were held, not in your name, but rather in an account at a brokerage firm, bank, dealer or other similar organization, then you are the beneficial owner of shares held in “street name” and these proxy materials are being forwarded to you by that organization. The organization holding your account is considered to be the shareholder of record for purposes of voting at the Annual Meeting. As a beneficial owner, you have the right to direct your broker or other agent regarding how to vote the shares in your account. You are also invited to attend the Annual Meeting. However, since you are not the shareholder of record, you may not vote your shares at the Annual Meeting unless you request and obtain a valid proxy from your broker or other agent.

If you are a shareholder of record, you may vote online at the Annual Meeting, vote by proxy over the telephone, vote by proxy through the internet or vote by proxy using the enclosed proxy card. Whether or not you plan to attend the virtual Annual Meeting, we urge you to vote by proxy to ensure your vote is counted. You may still attend the virtual Annual Meeting and vote online even if you have already voted by proxy.

If you are a beneficial owner of shares registered in the name of your brokerage firm, bank, dealer or other agent, you should have received a voting instruction form with these proxy materials from that organization rather than from FNCB. Simply complete and mail the voting instruction form to ensure that your vote is counted. Alternatively, you may vote by telephone or over the internet as instructed by your broker or bank. To vote at the Annual Meeting, you must obtain a valid proxy from your brokerage firm, bank, dealer or other agent. Follow the instructions from your broker or bank or contact your broker or bank to request a proxy form.

If you return a signed and dated proxy card or otherwise vote without marking voting selections, your shares will be voted, as applicable, “For” the election of each of the nominees for director, “For” the non-binding proposal regarding the compensation of FNCB’s named executive officers, “For” the approval of the Equity Plan and “For” the ratification of the appointment of Baker Tilly US, LLP as FNCB’s independent registered public accounting firm for the year ending December 31, 2023. If any other matter is properly presented at the meeting, your proxy holder (one of the individuals named on your proxy card) will vote your shares using his or her best judgment.

If you are a beneficial owner of shares held in street name, in order to ensure your shares are voted in the way you would prefer, you must provide voting instructions to your broker, bank or other agent by the deadline provided in the materials you receive from your broker, bank or other agent.

Yes. You can revoke your proxy at any time before the final vote at the Annual Meeting. If you are the record holder of your shares, you may revoke your proxy in any one of the following ways:

Your most recent proxy card or telephone or internet proxy is the one that is counted.

If your shares are held by your brokerage firm, bank, dealer or other agent as a nominee, you should follow the instructions provided by your broker or bank.

We have not authorized anyone to provide you with information about FNCB; therefore, you should rely only on the information contained in this document or on documents to which we refer you. Although we believe we have provided you with all the information helpful to you in your decision to vote, events may occur at FNCB after printing this proxy statement that might affect your decision or the value of your stock.

In accordance with Section 2.02 of FNCB’s bylaws, FNCB has a classified Board of Directors with staggered three-year terms of office. The Board is divided into three classes, with each class to be as nearly equal in number as possible. The terms of the separate classes expire in successive years. Thus, at each annual meeting of shareholders, successors to the class of directors whose term then expires are elected to hold office for a term of three years. Therefore, the term of office of one class of directors expires in each year. The Board of Directors is authorized to change the number of directors that constitutes the whole Board of Directors provided that the total number of directors in each class remains relatively proportionate to the others. The Board of Directors currently consists of eleven (11) members and is divided into three classes, with one class of directors elected each year.

Unless otherwise instructed, the proxy holders will vote the proxies received for the election of the four (4) nominees for Class A Director named below. If any nominee should become unavailable to serve as director for any reason, proxies will be voted in favor of a substitute nominee as designated by the Board of Directors. The Board of Directors currently believes that the nominees named will be able to serve if elected. Any vacancy on the Board of Directors, including vacancies resulting from an increase in the number of directors, will be filled by a majority vote of the remaining members of the Board of Directors and each person so appointed will be a director until the expiration of the term of office of the class to which he or she was appointed. Assuming the presence of a quorum, the four (4) nominees for director below receiving the highest number of votes will be elected at the annual meeting.

Cumulative voting rights do not exist with respect to the election of directors. Except as may otherwise be provided by statute or by the articles of incorporation, at every shareholders’ meeting, each shareholder entitled to vote has the right to one vote for each share of common stock owned on the record date fixed for the meeting. For example, if a shareholder owns 100 shares of common stock, he or she may cast up to 100 votes for each of the nominees for director in the class to be elected.

Upon the recommendation of the Nominating and Governance Committee, FNCB’s Board of Directors has nominated the four (4) individuals listed below for election as directors at the Annual Meeting. If you elect the nominees listed below, they will hold office until the annual meeting of shareholders in 2026 or until their successors have been duly elected and qualified or such director’s earlier death, resignation or removal for cause. All nominees are currently serving on our Board and have consented to being named in this proxy statement and to serve if elected. The brief biographies below include information as of March 23, 2023 regarding the specific and particular experience, qualifications, attributes or skills of each director or nominee that led the Nominating and Governance Committee to believe that the nominee should continue to serve on the Board. However, each of the members of the Nominating and Governance Committee may have a variety of reasons why such member believes a particular person would be an appropriate nominee for the Board, and these views may differ from the views of other members.

Our Board of Directors believes that the purpose of corporate governance is to promote shareholder value in a manner consistent with legal requirements and the highest standards of integrity. The Board has adopted and adheres to corporate governance practices that it and management believe promote this purpose, are sound and represent best practices. The Board routinely reviews these governance practices, Pennsylvania law (FNCB’s state of incorporation), the rules and listing standards of Nasdaq, and Securities and Exchange Commission (“SEC”) regulations, as well as best practices suggested by recognized governance authorities to maintain the highest governance standards.

Currently, the Board of Directors has eleven (11) members. FNCB evaluates the independence of directors under the SEC and Nasdaq stock market’s standards for independence. The Nasdaq standards require the Board of Directors be comprised of a majority of independent directors. The Nasdaq standards also require that, except for exceptional and limited circumstances, the Board of Directors maintain an audit committee comprised only of independent directors and that director nominees must be selected either by independent directors comprising a majority of the Board’s independent directors in a vote in which only independent directors participate, or by a nominations committee comprised solely of independent directors. The Nominating and Governance Committee of FNCB’s Board has responsibility for selecting director nominees and is comprised solely of independent directors. Nasdaq corporate governance standards also require that the Board maintain a Compensation Committee comprised of at least two members, each of whom is an independent director. The Board of Directors of FNCB has appointed a Compensation Committee, currently comprised of four directors, each of whom the Board has determined is independent.

Independence is reviewed at least annually to determine whether all existing and potential committee members are independent. The Board of Directors has determined that William G. Bracey, Joseph Coccia, William P. Conaboy, Esq., Dominick L. DeNaples, Joseph L. DeNaples, Esq., Louis A. DeNaples, Louis A. DeNaples, Jr. M.D., Keith W. Eckel, Kathleen McCarthy Lambert, CPA, and Thomas J. Melone, CPA met the standards for independence.

In making its independence determinations, the Board considers all relevant facts and circumstances, and not merely from the standpoint of the director, but also from that of persons or organizations with which the director has an affiliation. The Board considered that in the ordinary course of business FNCB and the Bank may provide commercial banking and other services to some of the independent directors and to business organizations and to individuals associated with them. The Board also considered that in the ordinary course of business some business organizations with which an independent director is associated may provide products and services to FNCB and the Bank. The Board has determined that, based on the information available to the Board, none of these relationships were material.

Joseph L. DeNaples, Esquire, a director, is a partner at the law firm of Cipriani & Werner, which provided legal services to FNCB during 2022. The Board has considered this relationship and determined that it did not impair Mr. DeNaples’ independence as it relates to his membership as a Director on the Boards of FNCB and the Bank and membership on the Compensation and Nominating and Governance Committees.

FNCB’s business is managed under the direction of our Board of Directors, in accordance with the Pennsylvania Business Corporation Law, FNCB’s Articles of Incorporation and its bylaws. The positions of Chairman of the Board and Chief Executive Officer are separated, as the Board believes separation of these

positions enhances the independent oversight of FNCB and the monitoring and objective evaluation of the Chief Executive Officer’s performance. Mr. Louis A. DeNaples serves as non-executive Chairman of the Board of Directors and is independent of management.

Management is responsible for the day-to-day management of the risks faced by FNCB, while the Board of Directors, as a whole, is responsible for the general oversight of risk management. For 2022, this oversight was primarily conducted through the Risk Management and Audit Committees.

The Risk Management Committee has the primary role in risk management of FNCB, oversees FNCB’s enterprise-wide risk management program and provides oversight and guidance to management on FNCB’s risk appetite. The Audit Committee, pursuant to its charter, considers and reviews with FNCB’s internal audit department, independent registered public accounting firm, and management, the adequacy of FNCB’s internal controls, including the processes for identifying significant risks or exposures, and elicits recommendations for the improvements of such procedures where desirable. In addition to the Audit and Risk Management Committees roles, the full Board of Directors is involved in establishing the risk appetite for FNCB and the oversight and administration of risk and risk management practices by overseeing members of executive management in their risk management capacities, regularly reviewing and analyzing FNCB’s investment and loan portfolios and accompanying risk levels, and considering the potential impact on FNCB’s objectives. Members of FNCB’s executive management have day-to-day responsibility for risk management and establishing risk management practices, and members of management are expected to report matters relating specifically to the Risk Management Committee and Audit Committee directly thereto, and to report all other matters directly to the Board of Directors as a whole. Members of FNCB’s executive management have an open line of communication to the Board of Directors and have the discretion to raise issues from time-to-time in any manner they deem appropriate, and management’s reporting on issues relating to risk management typically occurs through direct communication with directors or committee members as matters requiring attention typically arise.

The Bank Board maintains a Directors Loan Committee that is comprised of Louis A. DeNaples, Chairman of the Board and the following Directors: Gerard A. Champi, President and Chief Executive Officer, Dominick L. DeNaples, Joseph L. DeNaples, Esquire, Keith W. Eckel (Committee Chairperson), Kathleen McCarthy Lambert, CPA and Thomas J. Melone, CPA. The Committee also includes the following members of Executive Management of the Bank: Chief Financial Officer, Chief Banking Officer, Chief Lending Officer, Chief Credit Officer, the Credit Administration Officer and the Commercial Lending Team Managers. The Directors Loan Committee meets bi-weekly or more often as necessary. In 2022, this committee met twenty-seven (27) times.

The Asset and Liability Management Committee (“ALCO Committee”) is comprised of the following Directors: Gerard A. Champi, President and Chief Executive Officer, Joseph Coccia, Dominick L. DeNaples, Joseph L. DeNaples, Esq. and Kathleen McCarthy Lambert (Committee Chairperson). In addition to the President and Chief Executive Officer, the following members of Executive Management of the Bank are members of the ALCO Committee: Chief Financial Officer, Chief Banking Officer, Chief Credit Officer, the Senior Vice President and Chief Accounting Officer and the Senior Vice President and Operations Officer. The ALCO Committee meets quarterly or more often as necessary. In 2022 this committee met four (4) times.

During 2022, FNCB’s Board of Directors held twelve (12) meetings. Each of the directors attended at least 75% of the meetings of FNCB’s Board of Directors and of the committees on which they served. Pursuant to FNCB’s policy, the directors are expected to attend FNCB’s annual meeting of shareholders. All of FNCB’s directors attended FNCB’s annual meeting of shareholders in 2022.

FNCB’s Board of Directors has four standing committees: Audit Committee, Compensation Committee, Nominating and Governance Committee and Risk Management Committee. The Nominating and Governance Committee is the committee that makes director nominating recommendations to the Board of Directors. The charters of these committees have been approved by the Board of Directors and are each available on FNCB’s website investors.fncb.com.

The following table shows the current composition of each standing committee of the FNCB Board of Directors, the number of meetings held by such committees during 2022 and the independence and tenure of each director.

 

The Board of Directors has a standing Audit Committee established in accordance with Section 3(a)(58)(A) of the Exchange Act. The Board of Directors has determined that each of the members of the Audit Committee is independent, as that term is defined by the SEC and in the NASDAQ listing standards related to audit committees. The current Audit Committee charter is available in the Investor Relations section on FNCB’s website at investors.fncb.com by clicking on Governance, Governance Documents and then selecting “Audit Committee Charter.” The principal duties of the Audit Committee, as set forth in its charter, include reviewing and discussing the audited financial statements with management and the independent registered public accounting firm and, based on such reviews and discussions, recommending to the Board of Directors that the audited financial statement be included in FNCB’s annual report on Form 10-K; reviewing significant audit and accounting principles, policies and practices; reviewing the effectiveness of the internal audit function and internal controls over financial reporting; reviewing reports of examination received from regulatory authorities; and reviewing the performance and independence of and recommending, annually, to the Board of Directors the engagement of an independent registered public accounting firm.

Currently, the Board has identified Thomas J. Melone, CPA and Kathleen McCarthy Lambert, CPA as Audit Committee financial experts. Mr. Melone qualifies as a financial expert based on his extensive accounting experience as a certified public accountant and as a partner of the Albert B. Melone Company Certified Public Accountants. Ms. Lambert qualifies as a financial expert based on her extensive accounting experience as a certified public accountant and as Chief Financial Officer of McCarthy Tire Service Company and its subsidiaries.

The Compensation Committee operates under a written charter that has been approved by the Board of Directors. The charter is reviewed annually by the Compensation Committee with any recommended changes approved by the Board of Directors. The current Compensation Committee charter is available in the Investor Relations section on FNCB’s website at investors.fncb.com by clicking on Governance, Governance Documents and then selecting “Compensation Committee Charter.” As noted above, the Board of Directors has determined that each of the directors serving on this committee qualifies as an “independent” director under the applicable standard. The Compensation Committee is responsible for evaluating and approving FNCB’s compensation plans, policies, and programs. The Compensation Committee has the authority to retain and terminate a compensation consulting firm, including the authority to approve the firm’s fees and other terms of retention. The Compensation Committee also has the authority to delegate responsibility to subcommittees. For a discussion of the role of the Compensation Committee in determining executive and director compensation, see the discussion in the “Executive Compensation” section under the heading entitled– “Overview” below.

The Nominating and Governance Committee operates under a written charter that has been approved by the Board of Directors. The charter is reviewed annually by the Nominating and Governance Committee with any recommended changes approved by the Board of Directors. The current Nominating and Governance Committee charter is available in the Investor Relations section on FNCB’s website at investors.fncb.com by clicking on Governance, Governance Documents and then selecting “Nominating and Governance Committee Charter.” The Board of Directors has determined that each of the directors serving on this committee qualifies as “independent” under the applicable standard.

In recommending director nominees to the Board of Directors, the Nominating and Governance Committee seeks individuals who are qualified to be directors based on the committee’s judgment of the potential candidate’s experience, skills and knowledge of business and management practices. If needed, the Nominating and Governance Committee will use a third-party search firm to assist in finding director candidates. No such firms were engaged to evaluate or assist in identifying potential director nominees in 2022.

The Nominating and Governance Committee and the Board of Directors have not established a specific diversity component in their consideration of candidates for director and instead considers the diversity of directors as part of the overall mix of factors when identifying and evaluating candidates for the Board of Directors. FNCB considers diversity broadly to include differences of viewpoint, professional experience, individual characteristics, qualities, and skills, resulting in naturally varying perspectives among the directors and individual skills that complement the full Board. Therefore, the Board, as a unit, possesses the appropriate skills and experience to oversee FNCB’s business.

The Nominating and Governance Committee will give appropriate consideration to qualified persons recommended by shareholders for nomination as directors and will evaluate such qualified persons in the same manner as other identified candidates, when submitted prior to the shareholder proposal date referred to in the question entitled “When are shareholder proposals and director nominations due for

next year’s annual meeting” in the “Questions and Answers About These Proxy Materials” section of this Proxy Statement (the “Proposals Section”), provided such recommendations comply with the advance notice procedures in FNCB’s bylaws, which are summarized in the Proposals Section. Such recommendations must also include sufficient biographical information about the proposed nominee and information required under Rule 14a-19(b) of the Exchange Act to assist the Nominating and Governance Committee in evaluating the qualifications and experience of the proposed nominee, and the proposed nominee’s consent to serving as a director if elected. Shareholders must deliver any proposals or nominations in writing to the Nominating and Governance Committee or the Secretary of FNCB Bancorp, Inc. at its principal executive office, 102 E. Drinker Street, Dunmore, Pennsylvania 18512.

Any nomination for director made by a shareholder not made in accordance with Section 2.16 of FNCB’s bylaws will be disregarded by the presiding officer of the annual meeting, and votes cast for each such nominee will be disregarded by the Judge of Election. In the event that the same person is nominated by more than one shareholder, if at least one nomination for such person complies with Section 2.16, the nomination will be honored, and all votes cast for the nominee will be counted.

Nominations for election to the Board of Directors by a Shareholder

In addition, any shareholder who intends to nominate a candidate for election to the Board of Directors (other than a candidate proposed by FNCB’s then existing Board of Directors) or submit a proposal for consideration at the 2024 annual meeting must comply with the advance notice provisions of FNCB’s bylaws. The advance notice provisions in FNCB’s bylaws require that the additional information required under Sections 1.07 and 1.08 of FNCB’s bylaws must be provided to FNCB by a shareholder submitting a shareholder proposal.

In connection with the nomination of a candidate for director, the advance notice provisions in FNCB’s bylaws require that the additional information required under Section 2.16 of FNCB’s bylaws must be provided to FNCB by an eligible shareholder submitting a shareholder proposal, including the information required under Rule 14a-19(b) of the Exchange Act.

Copies of the full text of the bylaw provision relating to advance notice can be obtained by writing to Joseph Coccia, Secretary, at 102 East Drinker St., Dunmore, PA 18512.

The Risk Management Committee operates under a written charter that has been approved by the Board of Directors. The charter is reviewed annually by the Risk Management Committee with any recommended changes approved by the Board of Directors. The current Risk Management Committee charter is available in the Investor Relations section on FNCB’s website at investors.fncb.com by clicking on Governance, Governance Documents and then selecting “Risk Management Committee Charter.” The Risk Management Committee is responsible for ensuring management has established an enterprise-wide risk management program and for providing oversight and guidance to management regarding FNCB’s risks. The Risk Management Committee has authority to retain independent counsel, experts and advisors it believes are appropriate in carrying out its duties, including the authority to approve the advisor’s fees and other terms of retention. The Risk Management Committee also has the authority to delegate responsibility to subcommittees.

FNCB has adopted a Code of Business Conduct and Ethics (the “Code”) that applies to FNCB’s directors, officers and employees, including the President and Principal Executive Officer (“PEO”), Principal Financial Officer (“PFO”) and Principal Accounting Officer (“PAO”). The Code includes guidelines relating to compliance with laws, the ethical handling of actual or potential conflicts of interest, the use of corporate opportunities, protection and use of FNCB’s confidential information, accepting gifts and business courtesies, accurate financial and regulatory reporting, and procedures for promoting compliance with, and reporting violations of, the Code. The Code is available in the Investor Relations section on FNCB’s website at investors.fncb.com by clicking on Governance, Governance Documents, and then selecting “Code of Business Conduct and Ethics.” FNCB intends to post any amendments to the Code on its website and to disclose any waivers (to the extent applicable to FNCB’s President and PEO, PFO or PAO) on a Form 8-K within the prescribed time period.

Any security holder who wishes to communicate with the Board of Directors may send correspondence to Joseph Coccia, Secretary, at 102 East Drinker St., Dunmore, PA 18512, or by sending an electronic message to corporatesecretary@fncb.com. Mr. Coccia will submit your correspondence to the Board of Directors or the appropriate committee as applicable.

Directors serving on the Board of Directors of the Bank are entitled to participate in the Bank’s Deferred Compensation Plan. Under the Deferred Compensation Plan, directors may voluntarily defer up to 50% of the director fees paid to them for service on the Board of Directors of the Bank. Participants are vested in their account balances in the Deferred Compensation Plan. As such, upon ceasing to serve as a director for any reason whatsoever, voluntary or involuntary, including involuntary termination for cause, termination on a change of control, voluntary termination, early retirement or because of death or disability, the amount of the Deferred Compensation Plan account balance will be payable pursuant to the terms of the Deferred Compensation Plan. Amounts payable under the Deferred Compensation Plan are unsecured, unfunded obligations of the Bank.

Directors who are not employees or officers of FNCB or the Bank are eligible to participate in the LTIP and, if approved by the shareholders pursuant to Proposal 3, the Equity Plan. On July 1, 2022, 1,869 shares of FNCB's common stock were granted under the LTIP to each of FNCB Bank's nine non-employee directors, or 16,821 shares in the aggregate. The shares of common stock vested immediately to each director upon grant. The fair value on the grant date was $8.03 per share, or $135 thousand in aggregate, which was included in directors’ fees in 2022.

The following table sets forth certain information regarding ownership of FNCB’s common stock as of March 23, 2023 by: (i) each director; (ii) each of FNCB’s named executive officers; and (iii) all executive officers and directors of FNCB as a group. The address of each of the beneficial owners identified is 102 E. Drinker Street, Dunmore, PA 18512. Except as otherwise indicated, each person included in this table owns his or her shares directly and possesses sole voting and sole investment power with respect to all such shares, none of which are pledged as security. Except as set forth under “Principal Owners” and below, FNCB knows of no other person or persons who beneficially owns more than 5.0% of FNCB’s common stock. Further, FNCB is not aware of any arrangement which at a subsequent date may result in a change of control of FNCB.

Section 16(a) of the Exchange Act requires FNCB’s officers and directors, and persons who own more than ten percent of a registered class of FNCB’s equity securities (“10% Shareholders”) to file reports of ownership and changes in ownership with the SEC. Officers, directors and 10% Shareholders are required to furnish FNCB with copies of all Section 16(a) forms they file.

FNCB reviewed the copies of such reports received and the written representations from the officers, directors and 10% shareholders. Based on this review, FNCB believes that all such filing requirements were met during 2022.

FNCB and the Bank have engaged in and intend to continue to engage in banking and financial transactions in the ordinary course of business with directors and officers of FNCB and the Bank and their affiliates on comparable terms and with similar interest rates as those prevailing from time to time for other customers not related to FNCB or the Bank. FNCB’s Code of Business Conduct and Ethics applies to all directors, officers, and employees of FNCB and provides guidelines for those covered persons who may have a potential or apparent conflict of interest. Pursuant to the Code, a “conflict of interest” exists any time a covered person’s private interest interferes/conflicts, or even appears to interfere/conflict, in any way with the interests of FNCB and the Bank. Under the Code, if a conflict of interest arises, the Board must act with care to avoid even the appearance that any actions were not in the best interest of FNCB and the Bank.

Board of Directors’ approval is required for FNCB to do business with a company in which a member of the Board of Directors, an officer, an employee or a family member of a director, officer or employee owns, directly or indirectly, an interest. To identify related party transactions, each year, FNCB submits and requires its directors and officers to complete Director and Officer Questionnaires identifying any transaction with FNCB or any of its subsidiaries in which the officer or director or their family members have an interest. The Board of Directors reviews related party transactions due to the potential for a conflict of interest. Each year, FNCB’s directors and executive officers also review our Code.

Additionally, FNCB has further obligations for the review and approval of loans that are made to directors and officers pursuant to Regulation O (Loans to Executive Officers, Directors and Principal Shareholders of Member Banks) and FNCB’s written Loan Policy. Any business dealing, including extensions of credit, between FNCB or the Bank and a director or officer of FNCB or the Bank, or with an affiliate of a director or officer, other than a deposit, trust service or other product or service provided by a bank in the ordinary course of business, is required to be approved by a majority of disinterested directors. In considering a proposed insider transaction, the disinterested directors are to reasonably determine whether the transaction would be in the best interest of FNCB or the Bank and whether the terms and conditions, including price, are substantially the same as those prevailing at the time for comparable transactions with non-insiders. The responsibility for monitoring compliance with Regulation O rests with the Bank’s Credit Administration Unit and Internal Auditor as required by the Bank’s Loan Policy.

There were no loan transactions originated during 2022 which were required to be reported where such policy and procedures were not followed. Loans to directors, executive officers and their related parties (i) were made in the ordinary course of business, (ii) were made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with other persons not related to FNCB or Bank and (iii) did not involve more than the normal risk of collection or present other unfavorable features.

In the course of its operations, FNCB acquires goods and services from and transacts business with various companies of related parties. FNCB believes these transactions were made on the same terms as those for comparable transactions with unaffiliated parties. FNCB recorded aggregate payments for these services of $0.5 million in 2022 and $2.0 million in 2021. None of these transactions exceeded $120 thousand, except as described below.

Louis A. DeNaples’ son-in-law who is also the brother-in-law to Louis A. DeNaples, Jr. is a principal owner of an insurance agency that writes insurance for FNCB. The total amount paid by FNCB for insurance premiums and commissions was approximately $471 thousand in 2022 and $453 thousand in 2021. Mr. DeNaples’ son-in-law acts as an agent and derives a commission on the placement of insurance coverage. These services were awarded based on the results of a competitive bidding process.

Information as of March 23, 2023, regarding persons who are executive officers of FNCB or the Bank and who are not directors of FNCB is set forth below. Except as otherwise indicated, the occupation listed has been such person’s principal occupation for at least the last five years.

 

The series of tables that follow and accompanying narrative provide information about the compensation earned or paid in 2022 to FNCB’s named executive officers. At December 31, 2022, the following individuals were serving as our named executives:

FNCB is committed to responsible compensation practices and strives to balance sound risk management with the need to attract, hire, motivate and retain executive team members who will maximize successful performance. FNCB intends to provide executives with a balanced mix of fixed and variable pay. The purpose of all incentive plans is to motivate, reward and reinforce performance and achievement of team and/or individual goals in support of FNCB’s strategic objectives for growth and profitability. They provide the opportunity for reward for meeting and exceeding established financial goals as well as recognition of individual achievements.

FNCB engages Blanchard Consulting Group (“Blanchard”) to provide compensation consulting services. During 2022, Blanchard was engaged to review and recommend enhancements to FNCB’s overall compensation program. Blanchard was chosen due to their extensive knowledge and experience in the financial services industry as well as their nationwide perspective. The Compensation Committee has evaluated the independence of Blanchard and concluded that no conflict of interest exists.

The Compensation Committee makes, or has final approval authority regarding, all compensation decisions with respect to each of our executive officers in order to provide them with competitive compensation for their respective positions and to provide opportunities based upon their contributions to FNCB’s development and financial success in accordance with the overall design of FNCB’s compensation package.

Input from management, including the President and Chief Executive Officer and the Human Resources Officer, along with FNCB’s external consultants was critical for the Board of Directors and Compensation Committee in making informed and appropriate decisions regarding compensation for executive officers other than the President and Chief Executive Officer. The Compensation Committee has the sole responsibility for setting the compensation for our President and Chief Executive Officer. Each member of management excuses himself or herself from all Board and Compensation Committee discussions of that individual’s compensation. For 2022, input from management included:

The overall executive compensation philosophy and strategy and primary objective of the Board of Directors with respect to executive compensation at FNCB is to provide a total compensation package that meets the following interrelated goals:

The named executive officers receive base salaries and various types of incentives commensurate with their positions, responsibilities, and accomplishments. Specifically, FNCB has a formal Executive Incentive Plan that links cash bonus awards to Bank-specific targets and individual performance factors. Under the terms of the Executive Incentive Plan, each year the Board of Directors establishes the Bank-wide financial targets which are utilized to trigger funding of the Executive Incentive Plan. Under the Executive Incentive Plan, Mr. Champi is eligible for a bonus of 30.0% of his base salary at target levels and each of the other named executive officers is eligible for a bonus of 18.0% of his or her base salary at target levels. For 2022, the Board of Directors approved return on average assets (“ROAA”) and net income as the Bank-wide performance factors. The Board of Directors believe that these performance factors align the interests of our executives with those of our shareholders and FNCB’s Strategic Plan. Under the Executive Incentive Plan, the Bank was required to meet both factors with ROAA weighted 60.0% and net income weighted 40.0%.

Based on its 2022 financial results, the Bank exceeded the budgetary targets for both performance factors, with ROAA of 1.24% being 115.9% of the target and net income of $20.9 million being 114.7% of the target.

Comparatively, for 2021, the Bank exceeded the budgetary targets for both performance factors, with ROAA of 1.36% being 117.2% of the target and net income of $21.2 million being 134.9% of the target.

Based on the 2022 performance results, on January 25, 2023, the Board of Directors authorized cash bonus awards under the EIP to be paid in the first quarter of 2023.

 

 

FNCB and the Bank have entered into an Employment Agreement with Mr. Bone and the Bank has entered into Employment Agreements with Mr. Champi and Mr. Mahlstedt. Employment Agreements are commonly used by the banking industry and by FNCB’s peer group to retain key executives and define an overall compensation package that is aligned with shareholder interests. Below is a summary of each named executive officer’s Employment Agreement.

The provisions under the Employment Agreements include the named executive officer’s initial base salary, subject to annual review adjustments by the Compensation Committee and the Board. Each of the Employment Agreements also state that the named executive officer is eligible to participate in FNCB’s Executive Incentive Plan and Long-Term Incentive Plan according to the terms of those Plans. Each such Employment Agreement also states that each named executive officer will be provided with a Supplemental Retirement Plan. Each such Employment Agreement specifies that each named executive officer will be reimbursed for annual country club dues and use of a Bank provided automobile. Each named executive officer’s Employment Agreement has a term of three years, with consideration for an annual renewal of an additional three years on March 31st of each calendar year. Each named executive officer’s Employment Agreement includes a non-compete clause which will be in effect for twelve months after an involuntary separation by the Bank or after a Change of Control termination as defined in his Agreement.

In the event of a Change of Control during which his employment with the Bank is terminated “without cause” (as defined in the Employment Agreements), i) within 120 days immediately prior to and in conjunction with a Change in Control or within one year following consummation of a Change in Control or ii) the terms and conditions of his position are substantially altered as defined in the Employment Agreement, each named executive officer will receive a total severance payment equal to 2.99 years base salary at the highest rate in effect during the 12-month period immediately preceding his last day of employment plus the average Executive Incentive Plan cash award received over the last three preceding years. Each named executive officer will remain eligible to participate in the Bank’s medical benefits program while receiving severance.

In the event that the named executive officer is released “without cause” while the Employment Agreement is in effect, he will receive a total severance payment equal to 2.99 years base salary at the highest rate in effect during the 12-month period immediately preceding his last day of employment plus the average cash award paid to him over the last three preceding years from the Executive Incentive Plan.

Each named executive officer will remain eligible to participate in the Bank’s medical benefits program while receiving severance from either involuntary separation not for cause or because of a Change of Control (as defined in the Employment Agreements).

Each named executive officer’s Employment Agreement would terminate upon his death except that any remaining separation payments due to the named executive officer as a result of a change of control or involuntary separation not for cause will be paid to the named executive officer’s beneficiary.

Notwithstanding any other provisions of the LTIP, and except as otherwise provided in an award agreement, if there is a change in control, all stock-based awards granted under the LTIP will immediately vest 100% for each Participant, including incentive stock options, nonqualified stock options, stock appreciation rights, restricted stock and restricted stock units. However, no stock-based award granted or made during a period when FNCB is subject to FDIC Part 359 golden parachute requirements will be subject to acceleration of vesting pursuant to the LTIP. In addition, no stock-based awards, whenever granted or made, will vest if the Change in Control occurs during a period when FNCB is subject to FDIC Part 359.

The foregoing narrative regarding payments on a change in control or other termination of employment does not reflect payments that would be provided to each named executive officer under the 401(k) Plan

following termination of employment, or under FNCB’s disability or life insurance plan in the event of death or disability, as applicable, on the last business day of the fiscal year ended December 31, 2022 because these plans are generally available to all regular salaried employees.

FNCB’s executive compensation philosophy and strategy is intended to be competitive in the marketplace to reward executives for strong performance through multiple compensation vehicles. All the components are balanced, integrated, and designed to provide a total compensation environment which will enhance the executives’ relationship with FNCB and support the growth of overall shareholder value.

The various elements of the total compensation package are subtly interrelated but are intended to focus the executive on both short-term and long-term performance of FNCB. While there is not a direct relationship between components, if in a given year the Board of Directors or Compensation Committee decides, for purposeful reasons, to “overweight” one component of total compensation (as compared to the market) they may “underweight” another so that total compensation remains competitive.

FNCB provides its shareholders with the opportunity to cast an annual advisory vote on executive compensation, commonly referred to as a say-on-pay vote. At FNCB’s Annual Meeting of Shareholders held in May 2022, approximately 94.8% of the votes cast on the say-on-pay proposal at the meeting were voted in favor of our executive compensation program. The Compensation Committee believes this vote affirms the shareholders’ support of FNCB’s approach to executive compensation; however, the Compensation Committee will continue to oversee the executive compensation programs consistent with objectives set forth herein and consider the outcome of FNCB’s future say-on-pay votes, regulatory changes and best practices in the industry when making future compensation decisions for the named executive officers.

Pursuant to SEC rules, our Board annually asks our shareholders to vote in favor of an advisory proposal to approve the compensation of its named executive officers, as disclosed under the heading “Executive Compensation” in the Compensation Discussion and Analysis, the compensation tables, and any related material contained in this Proxy Statement.

This proposal, commonly known as a “Say-on-Pay” proposal, gives you as a shareholder the opportunity to endorse or not endorse FNCB’s executive pay program and policies through a non-binding advisory vote on the following resolution:

“Resolved, that the Shareholders approve the compensation of FNCB’s named executive officers, as disclosed under the heading “Executive Compensation,” the compensation tables and any related material contained in this Proxy Statement.”

The vote on this proposal is advisory and non-binding. However, the Compensation Committee will take into account the outcome of the vote when considering future executive compensation arrangements.

Upon the recommendation of the Company’s Compensation Committee, the proposed FNCB Bancorp, Inc. 2023 Equity Incentive Plan (“Equity Plan”) was formally approved and adopted by the Company’s Board of Directors on March 22, 2023 (the “Effective Date”) and will serve as a successor to the Company’s 2013 Long-Term Incentive Plan, as amended (the “Prior Plan”). The Equity Plan is designed to provide a means to attract, retain and reward individuals who contribute to the long-term success of FNCB and its subsidiaries, including the Bank, and to further align their interests with those of the Company’s shareholders through the ownership of the Company’s common stock. The proposed Equity Plan design provides the Administrator (as defined below) with authority to offer several different types of awards including Stock Options, Stock Appreciation Rights, Restricted Stock, Restricted Stock Units, Performance Shares and Performance Units. We have initially reserved 2,000,000 shares of the Company’s Common Stock, plus (a) any shares of common stock reserved, but not issued or subject to outstanding awards or granted under the Prior Plan on the Effective Date, (b) shares of common stock that are subject to outstanding awards granted under the Prior Plan that cease to be subject to such awards by forfeiture or otherwise after the Effective Date or (c) shares of common stock issued under the Prior Plan that are repurchased by the Company at the original issue price. Capitalized terms in this Proposal 3, unless otherwise defined herein, have the meanings assigned to such terms in the Equity Plan provided as Annex A to this Proxy Statement. The Company encourages you to review the provisions of the Equity Plan.

The Effective Date of the Equity Plan is March 22, 2023, subject to approval by the Company’s shareholders at the Annual Meeting. The Equity Plan will remain in effect, subject to the right of the Board of Directors to terminate the Equity Plan at any time, until all Awards granted under the Equity Plan have been paid or otherwise disposed of in accordance with the provisions of the Equity Plan. Awards may not be made under the Equity Plan on or after March 22, 2033.

No Awards will be granted under the Equity Plan before it is approved by our shareholders. Awards under the Equity Plan will be made to eligible Participants at the discretion of the Administrator. As a result, it is not possible to determine the number or type of Awards that may be granted at this time.

If the Equity Plan is approved by the Company’s shareholders, the Company intends to file a registration statement under the Securities Act of 1933, as amended, to register the shares to be issued pursuant to the Equity Plan.

The following is a summary of the principal features of the Equity Plan. This description is qualified in its entirety by the terms of the Equity Plan, a copy of which is attached as Annex A to this Proxy Statement and is incorporated herein by reference.

The Equity Plan will be administered by the Compensation Committee (or one or more subcommittees appointed by the Compensation Committee to administer the Equity Plan in accordance with Section 5.1 of the Equity Plan or, if no such Compensation Committee or subcommittee thereof exists, such other committee of the Board of Directors comprised solely of two or more persons who are “non-employee directors” of the Company, within the meaning of Rule 16b-3 under the Exchange Act) or the Board of Directors of the Company, which is referred in this Proposal 3 as the “Administrator.” Subject to the terms and conditions of the Equity Plan, the Administrator will have the authority, among other things, to select the persons to whom awards may be granted, construe and interpret the Equity Plan as well as to determine the terms of such awards and prescribe, amend and rescind the rules and regulations relating to the Equity Plan or any award granted thereunder. The Equity Plan provides that FNCB’s Board of

Directors or the Compensation Committee may delegate its authority, including the authority to grant awards, to any person or persons selected by it, including (a) delegating to a committee of one or more members of the Board who are not Disinterested Board Members, the authority to grant Awards under the Equity Plan to eligible persons who are not then subject to Section 16 of the Exchange Act; or (b) delegating to a committee of one or more members of the Board of Directors who would be eligible to serve on the Compensation Committee of the Company pursuant to the listing requirements imposed by any national securities Exchange on which the Company lists, has listed or seeks to list its securities, the authority to grant awards under the Equity Plan.

Persons eligible to participate in the Equity Plan include all Employees, Consultants (including advisors, such as members of the Company’s bank advisory board) and Non-employee Directors as selected and approved by the Administrator in its sole discretion. Subject to the provisions of the Equity Plan, the Administrator may select those Employees, Consultants and Non-employee Directors to whom Awards will be granted and determine the nature and amount of each Award.

The total number of shares of stock subject to Awards under the Equity Plan is 2,000,000 shares of common stock of the Company (the “Stock”) plus (a) any shares of Stock reserved, but not issued or subject to outstanding awards or granted under the Prior Plan on the Effective Date, (b) shares of Stock that are subject to outstanding awards granted under the Prior Plan that cease to be subject to such awards by forfeiture or otherwise after the Effective Date or (c) shares of Stock issued under the Prior Plan that are repurchased by the Company at the original issue price. No more than 2,000,000 shares of Stock may be delivered pursuant to the exercise of Stock Options that are granted as Incentive Stock Options described in Section 422(b) of the Internal Revenue Code of 1986, as amended (the “Code” and such Stock Options “Incentive Stock Options”). Stock delivered under the Equity Plan will consist of authorized and unissued shares or treasury shares.

The Administrator will determine the number of shares of Stock subject to each Stock Option, the terms and conditions including vesting and expiration, and whether the Stock Option is an Incentive Stock Option or a Nonqualified Stock Option. Only Employees may receive an Award of Incentive Stock Options. The exercise price for each Stock Option will be determined by the Administrator but may not be less than 100% of the Fair Market Value of the Stock on the date the Stock Option is granted. No Stock Option may be exercisable after the expiration date as determined by the Compensation Committee and defined in the Award Agreement; provided, however, that no Stock Option will be exercisable later than ten years after the date of grant of such Stock Option.

The Administrator may grant Stock Appreciation Rights to Service Providers in such amounts and on such terms as it may determine. A Stock Appreciation Right, or “SAR,” may be exercised upon such terms and conditions and for the term the Administrator determines in the Award Agreement; provided, however, that no Stock Appreciation Right will be exercisable later than ten years after the date of its grant. Upon exercise of a SAR, the Participant will be entitled to receive an amount determined by multiplying: (i) the difference between the Fair Market Value of a share of Stock on the exercise date and the price fixed by the Administrator on the date of the grant (which price may not be less than 100% of the Fair Market Value of a share of Stock on the date of the grant); by (ii) the number of shares of Stock with respect to which the SAR is exercised. The payment to the Participant of the amount due upon exercise of a SAR will be made in cash, shares of Stock having an equivalent value or a combination thereof.

The Administrator may grant shares of Restricted Stock and Restricted Stock Units to Service Providers in such amounts and on such terms as it may determine. Shares of Restricted Stock and Restricted Stock Units may not be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated until the termination of the applicable vesting period or for such period of time as will be established by the Administrator and as will be specified in the Award Agreement. After the last day of a vesting period or for such period of time as will be established by the Administrator and as will be specified in the Award Agreement, shares of Restricted Stock covered by such restrictions will become freely transferrable by the Participant, and the Participant will receive one share of Stock with respect to each Restricted Stock Unit covered by such restriction as set forth in the Award Agreement.

The Administrator may grant Performance Units or Performance Shares to Employees and/or Directors, subject to the terms and conditions the Compensation Committee determines. The Compensation Committee will have complete discretion in determining the number of Performance Units or Performance Shares granted to each Participant and the terms and conditions of such Awards. The Administrator will establish in advance Performance Goals over Performance Periods for each Award. Prior to each grant of Performance Units or Performance Shares, the Administrator will establish an initial value for each Performance Unit and an initial number of shares of Stock for each Performance Share granted to each Participant for that Performance Period. Prior to each grant of Performance Units or Performance Shares, the Administrator also will set the Performance Goals that will be used to determine the extent to which the Participant receives a payment of the value of the Performance Units or number of shares of Stock for the Performance Shares awarded for such Performance Period. Each Performance Unit Award will entitle the Participant to a payment in cash or Stock upon the attainment of performance criteria and other terms and conditions specified in the Award. The Administrator will have the authority to modify, amend or adjust the terms and conditions of any Award of Performance Units or Performance Shares, including the Performance Goals.

No Non-Employee Director may receive Awards under the Plan that, when combined with cash compensation received for service as a Non-Employee Director after the Effective Date, exceed $250,000 in value in any calendar year. The value of Awards for purposes of complying with this maximum will be determined as follows: (a) for Stock Options and SARs, grant date fair value will be calculated using the Company’s regular valuation methodology for determining the grant date fair value of Stock Options for reporting purposes, and (b) for all other Awards other than Stock Options and SARs, grant date fair value will be determined by either (i) calculating the product of the Fair Market Value per share of Stock on the date of grant and the aggregate number of shares of Stock subject to the Award, or (ii) calculating the product using an average of the Fair Market Value over a number of trading days and the aggregate number of shares of Stock subject to the Award as determined by the Administrator.

If certain changes in the Stock occur by reason of any recapitalization, reclassification, stock split, reverse split, spinoff, combination of shares, exchange of shares, extraordinary cash dividend, stock dividend or other distribution payable in Stock, or other increase or decrease in the Stock without receipt of consideration by the Company, occurring after the Effective Date, the number and kind of shares subject to the Share Limit and the number, kind and Purchase Price or Exercise Price per share (if applicable) of share subject to outstanding Awards shall be adjusted proportionally. In addition, in the event of any merger, consolidation, or other business reorganization (including, but not limited to a Change in Control), in which the Company is not the surviving entity, unless otherwise set forth in the agreement relating to the consummation of such merger, consolidation or other business reorganization, any Stock Options or SARS Award granted under the Equity Plan which are outstanding immediately prior to such transaction shall be converted, as applicable into Stock Options or SARs to purchase voting common equity securities of the business entity which survives such transaction, having substantially the same terms and conditions as the outstanding Stock Options or SARS under the Equity Plan.

Without shareholder approval, the Administrator is not authorized to make any adjustment or amendment that reduces or would have the effect of reducing the Exercise Price of a Stock Option previously granted under the Equity Plan.

Notwithstanding any other provisions of the Equity Plan, and except as otherwise provided in an Award Agreement, if there is a Change in Control, all Stock-based Awards will immediately vest 100% in each Participant, including Incentive Stock Options, Nonqualified Stock Options, Stock Appreciation Rights, Restricted Stock and Restricted Stock Units. However, no Stock-based Award granted or made during a period when the Company is subject to FDIC Part 359 golden parachute requirements will be subject to acceleration of vesting pursuant to the Equity Plan. In addition, no Stock-based Awards, whenever granted or made, will vest if the Change in Control occurs during a period when the Company is subject to FDIC Part 359.

Notwithstanding any other provisions of the Equity Plan, and except as otherwise provided in an Award Agreement, if there is a Change in Control, all Awards granted under the Equity Plan which are subject to Performance Goals will be immediately paid out, including Performance Units and Performance Shares. The amount of the payout will be based on the higher of (i) Target Level Performance; and (ii) the actual level of performance as of the date of such Change in Control. However, no Award subject to Performance Goals granted or made during a period when the Company is subject to FDIC Part 359 golden parachute requirements will be subject to immediate payout pursuant to the Equity Plan. In addition, no Awards subject to Performance Goals, whenever granted or made, will be immediately paid out pursuant to the Equity Plan if the Change in Control occurs during a period when the Company is subject to FDIC Part 359.

Unless otherwise specified by the Administrator and set forth in an Awards Agreement, subject to FDIC Part 359, the following provisions shall apply to each Award granted under the Equity Plan:

be determined by the Administrator, with any exercise beyond (a) three (3) months after the date Participant’s employment terminates when the termination of Continuous Service is for a Disability that is not a “permanent and total disability” as defined in Section 22(e)(3) of the Code or (b) twelve (12) months after the date Participant’s employment terminates when the termination of Continuous Service is for a Disability that is a “permanent and total disability” as defined in Section 22(e)(3) of the Code, deemed to be exercise of an NSO), or the remaining unexpired term of the Stock Option or SARs, if less.

The Company has the power and the right to deduct or withhold, or require a Participant to remit to the Company, an amount sufficient to satisfy applicable Federal, state and local taxes (including the Participant’s FICA obligation) required by law to be withheld with respect to any grant, exercise or payment made under or as a result of the Plan.

Notwithstanding any provision in the Equity Plan or any Award Agreement to the contrary, the Administrator may amend the Equity Plan or any Award Agreement, to take effect retroactively or otherwise, as deemed necessary or advisable for the purpose of (i) conforming the Equity Plan or the Award Agreement to any present or future law relating to plans of this or similar nature (including, but not limited to, Code Section 409A), or (ii) avoiding an accounting treatment resulting from an accounting pronouncement or interpretation thereof issued by the SEC or Financial Accounting Standards Board subsequent to the adoption of the Plan or the making of the Award affected thereby, which in the sole discretion of the Administrator, may materially and adversely affect the financial condition or results of operations of the Company. By accepting an Award under the Equity Plan, each Participant agrees and consents to any amendment made pursuant to the Equity Plan or Section 2.8 of the Equity Plan to any Award granted under the Equity Plan without further consideration or action.

A Participant or Beneficiary will not possess any rights of a shareholder with respect to the Stock covered by any Award unless and until the Participant becomes the record holder of such Stock, except that a Participant may have certain shareholder rights with respect to Restricted Stock as set forth in the Award.

The following is a brief summary of certain consequences to Participants and to the Company under the Internal Revenue Code of 1986, which we refer to as the “Code,” with respect to participation in the Equity Plan. This summary is not exhaustive and does not discuss the income tax laws of any city or state in which a Participant may reside. We intend this discussion to be for the information of shareholders considering how to vote with respect to this proposal and not as tax guidance to Participants in the Equity Plan.

There generally are no federal income tax consequences to the Participant or the Company upon the grant or exercise of an Incentive Stock Option, if at all times during the period beginning on the date of grant of the Stock Option and ending on the day three months before the date of exercise, the participant

was an Employee of the Company or one of its subsidiaries. However, the exercise of an Incentive Stock Option may subject the Participant to alternative minimum tax liability or increase the Participant’s alternative minimum tax liability, if any.

If a Participant holds stock acquired through exercise of an Incentive Stock Option for more than two years from the date on which the Stock Option was granted and more than one year after the date the Stock Option was exercised for those shares, any gain or loss on a disposition of those shares (a “qualifying disposition”) will be a long-term capital gain or loss. Upon such a qualifying disposition, the Company will not be entitled to any income tax deduction.

Generally, if the Participant disposes of the stock before the expiration of either of these holding periods (a “disqualifying disposition”), then at the time of disposition the Participant will realize taxable ordinary income equal to the lesser of (i) the excess of the stock’s Fair Market Value on the date of exercise over the exercise price, or (ii) the Participant’s actual gain, if any, on the purchase and sale. The Participant’s additional gain or loss upon the disqualifying disposition will be a capital gain or loss, which will be long-term or short-term depending on whether the Participant held such shares for more than one year.

If the above employment requirement, as described in the first paragraph of this section, is not satisfied, ordinary income will be recognized at the time of exercise under the tax rules governing the exercise of Nonqualified Stock Options.

To the extent the Participant recognized ordinary income, generally the Company will be entitled (subject to the requirement of reasonableness, the provisions of Code Section 162(m), and the satisfaction of any tax reporting obligations) to a corresponding income tax deduction.

A Participant recognizes no taxable income upon the grant of a Nonqualified Stock Option. Upon exercise of a Nonqualified Stock Option, the Participant will recognize ordinary income equal to the excess, if any, of the Fair Market Value of the purchased shares on the exercise date over the exercise price paid for those shares. Generally, the Company will be entitled (subject to the requirement of reasonableness, the provisions of Code Section 162(m), and the satisfaction of a tax reporting obligation) to a corresponding income tax deduction in the tax year in which such ordinary income is recognized by the Participant.

Upon disposition of the stock, the Participant will recognize a capital gain or loss equal to the difference between the selling price and the sum of the amount paid for such stock plus any amount recognized as ordinary income upon acquisition of the stock. Such gain or loss will be long-term or short-term depending on whether the Participant held such shares for more than one year.

A Participant recognizes no taxable income upon the receipt of an SAR. Upon exercise of the SAR, a Participant will recognize the cash received or the Fair Market Value of the shares received as ordinary income in the year of such exercise. Generally, with respect to employees (but not with respect to non-employee directors), the Code requires us to withhold from the payment made on exercise of the SAR or from regular wages or supplemental wage payments an amount based on the ordinary income that the Participant recognizes. Subject to the requirement of reasonableness, the provisions of Code Section 162(m), and the satisfaction of any tax reporting obligations, the Company will be entitled to an income tax deduction equal to the amount of ordinary income recognized by the Participant.

A Participant recognizes no taxable income upon the receipt of a restricted stock grant. The Award becomes taxable when it is no longer subject to a “substantial risk of forfeiture” (it becomes vested or transferable). The Participant will recognize ordinary income when the restrictions lapse equal to the excess of the Fair Market Value of the shares on the date the restrictions lapse over the price paid for those shares, if any. Subject to the requirement of reasonableness, the provisions of Code Section 162(m), and the satisfaction of any tax reporting obligations, the Company will be entitled to an income tax deduction equal to the amount of ordinary income recognized by the Participant.

Upon disposition of the stock, the Participant will recognize a capital gain or loss equal to the difference between the selling price and the sum of the amount paid for such stock, if any, plus any amount recognized as ordinary income upon the lapse of restrictions on the stock. Such gain or loss will be long-term or short-term depending on whether the stock was held for more than one year after vesting.

At the time of grant, a Participant may choose to recognize the difference between the Fair Market Value of the stock and the purchase price paid for the stock, if any, as ordinary income by filing, within thirty days of the grant date, an election pursuant to Code Section 83(b). In the event of such an election, the Participant will not recognize income upon vesting of the restricted stock Award. Upon a subsequent disposition of the stock, the Participant will recognize a capital gain or loss equal to the difference between the selling price and the sum of the amount paid for such stock, if any, plus any amount recognized as ordinary income at the time of grant. In the case of a Section 83(b) election, the holding period for determining whether such gain or loss will be long-term or short-term commences as of the date of grant. In the event that the Participant forfeits the shares of restricted stock, the Participant will not be entitled to a refund of the tax paid pursuant to the Section 83(b) election and any loss deduction may be limited to the purchase price, if any, paid by the Participant for the restricted stock.

A Performance Award is an award to an eligible Service Provider that is based upon the attainment of performance goals, as established by the Administrator, and other terms and conditions specified by the Administrator, and may be settled in cash, shares of Stock (which may consist of, without limitation, Restricted Stock), other property, or any combination thereof. Grants of Performance Awards will be made pursuant to an Award Agreement. A Performance Award may be a standalone Award or in the form of an Award that vests upon the achievement of one or more specified performance goals with respect to the applicable Performance Factors. Performance Shares, Performance Units and Restricted Stock Units will not result in taxable income to the participant or a tax deduction for the Company at the time of grant. Upon payment, the Participant will recognize ordinary income equal to the cash received and the Fair Market Value of any shares of Stock received and the Company will be entitled to a deduction equal to the ordinary income recognized by the Participant.

Upon receipt of an unrestricted Stock Award or a cash Award upon achievement of performance goals or under a bonus or incentive plan or program, the Participant will recognize ordinary income in the amount of the cash or the Fair Market Value of the Stock or the cash on the date of receipt. Subject to the requirement of reasonableness, the provisions of Code Section 162(m) and the satisfaction of any tax reporting obligations, the Company will be entitled to an income tax deduction equal to the amount of ordinary income recognized by the Participant.

Upon disposition of the stock, the Participant will recognize a capital gain or loss equal to the difference between the selling price and the amount recognized as ordinary income upon the receipt of the stock. Such gain or loss will be long-term or short-term depending on whether the participant held such shares for more than one year.

Under certain circumstances, the accelerated vesting of Awards in connection with a Change in Control of the Company might be deemed an “excess parachute payment” for purposes of the golden parachute tax provisions of Code Section 280G. To the extent they are considered excess parachute payments, a Participant may be subject to a 20% excise tax and the Company may be unable to receive a tax deduction.

Certain Awards, such Restricted Stock Units and SARs, may involve elements of deferred compensation, which is governed by Code Section 409A. If an amount constitutes “deferred compensation” under Code Section 409A and the requirements thereof are not satisfied, the Participant may be subject to a 20% excise tax in addition to ordinary income tax inclusion at the time the Award becomes vested, plus interest.

All Awards, subject to applicable law, will be subject to clawback or recoupment pursuant to any compensation clawback or recoupment policy adopted by the Board of Directors or required by law, and in addition to any other remedies available under such policy and applicable law, may require the cancellation of outstanding Awards and the recoupment of any gains realized with respect to Awards.

Our Board, as permitted by law, may amend or terminate the Equity Plan at any time or amend any Award Agreement, provided, however, that no amendment or termination, except as provided for in the Equity Plan, may cause the Award to violate Code Section 409A, may cause the repricing of a Stock Option, or in absence of written consent to the change by the affected Participant or beneficiary adversely impair the rights of any Participant or beneficiary under any Award granted under the Equity Plan prior to the date such amendment is adopted by the Board. No amendment may materially increase the benefits accruing to Participants under the Equity Plan, materially increase the aggregate number of securities that may be issued under than Equity Plan, other than as described in the Equity Plan, or materially modify the requirements for participation in the Equity Plan, unless they are approved by the Company’s shareholders.

A new plan benefits table for the Equity Plan and the benefits or amounts that would have been received by or allocated to participants for the last completed fiscal year under the Equity Plan if the Equity Plan was then in effect, as described in the federal proxy rules, are not provided because all awards made under the Equity Plan will be made at the Administrator’s discretion, subject to the terms of the Equity Plan. Therefore, the benefits and amounts that will be received or allocated under the Equity Plan are not determinable at this time. The equity grant program for the Company’s Non-Employee Directors is described under the Director Compensation section in this Proxy Statement.

See “Securities Authorized for Issuance under Equity Compensation Plan” on page 0 for the table required under Item 201(d) of Regulation S-K.

The approval of the EIP requires the affirmative vote of a majority of the votes cast in person or by proxy at the Annual Shareholder Meeting.

As discussed in the Audit Committee Report in this proxy statement, Baker Tilly US, LLP (“Baker Tilly”), an independent registered public accounting firm, audited the consolidated financial statements of FNCB for the year ended December 31, 2022.

FNCB is asking the shareholders to ratify the Audit Committee’s appointment of Baker Tilly as FNCB’s independent registered public accounting firm for the fiscal year ending December 31, 2023. In the event the shareholders fail to ratify the appointment, the Audit Committee will reconsider this appointment. Even if the appointment is ratified, the Audit Committee, in its discretion, may direct the appointment of a different independent registered public accounting firm at any time during the year if the Audit Committee determines that such a change would be in FNCB’s and its shareholders’ best interests.

A representative of Baker Tilly is expected to be present at the annual meeting and will have the opportunity to make a statement if he or she desires to do so and will also be available to respond to appropriate questions.

The ratification of the appointment of the independent registered public accounting firm requires the affirmative vote of a majority of the votes cast in person or by proxy at the annual meeting.

The Audit Committee has considered whether, and determined that, the provision of services rendered above was compatible with maintaining the independence of Baker Tilly in 2022 and 2021 as the independent registered public accounting firm. The Audit Committee concluded that the independence of the firm was maintained.

Pursuant to the Audit Committee Charter, FNCB is required to obtain pre-approval by the Audit Committee for all audit and permissible non-audit services obtained from its independent registered public accounting firm to the extent required by applicable law. In accordance with this pre-approval policy, the Audit Committee pre-approved all audit and tax services for fiscal years 2022 and 2021.

The Board of Directors knows of no other business which will be presented for consideration at the meeting other than as stated in the Notice of Meeting. However, if other matters properly come before the meeting, the shares of common stock represented by the signed proxies will be voted in accordance with the recommendations of the Board of Directors, and authority to do so is included in the proxy.

A copy of FNCB’s annual report to shareholders for its fiscal year ended December 31, 2022, was mailed on April 10, 2023. Any shareholder may obtain additional copies of FNCB’s Annual Report on Form 10-K for the year ended December 31, 2022, including the financial statements and related schedules and exhibits, required to be filed with the SEC, without charge, from FNCB’s website at investors.fncb.com or via email to corporatesecretary@fncb.com. This information may also be obtained by submitting a written request to Joseph Coccia, Secretary, at FNCB’s principal executive offices located at 102 East Drinker Street, Dunmore, Pennsylvania 18512.

In accordance with SEC Rule 14a-3(e)(1), FNCB delivers only one annual report and proxy statement to multiple shareholders sharing an address unless FNCB receives contrary instructions from one or more of the shareholders. This method of delivery is known as “householding.” Upon written or oral request, FNCB will promptly deliver a separate copy of the annual report or proxy statement, as applicable, to a shareholder at a shared address to which a single copy of the documents was delivered. Further, shareholders can notify FNCB by writing or calling Joseph Coccia, Secretary of FNCB Bancorp, Inc., at 102 E. Drinker Street, Dunmore, PA 18512 or (570) 346-7667 and inform FNCB that the shareholder wishes to receive a separate copy of an annual report or proxy statement in the future. In addition, if you are receiving multiple copies of FNCB’s annual report or proxy statement, you may request that we deliver only a single copy of annual reports or proxy statements by notifying us at the above address or telephone number.

By Order of the Board of Directors,