FNCB FNCB Bancorp Inc

FNCB Bancorp, Inc. (NASDAQ: FNCB; www.fncb.com), the parent company of Dunmore-based FNCB Bank (the “Bank”), (collectively, "FNCB") today reported net income of $2.8 million, or $0.14 per basic and diluted share, for the three months ended June 30, 2023, a decrease of $2.9 million, or 51.1%, compared to $5.7 million, or $0.29 per share for the same period of 2022. Lower net interest income and non-interest income, coupled with an increase in the provision for credit losses, were the primary factors leading to the reduction in second quarter 2023 earnings. For the six months, ended June 30, 2023, net income totaled $5.5 million, or $0.28 per basic and diluted share, a decrease of $4.6 million, or 45.8%, from $10.1 million, or $0.51 per basic and diluted share, for the same six months of 2022.

For the three and six months ended June 30, 2023, the annualized return on average assets was 0.63% and 0.62%, respectively, compared to 1.37% and 1.23%, respectively, for the same period of 2022. The annualized return on average equity was 8.89% and 8.87%, respectively, for the three and six months ended June 30, 2023, compared to 17.57% and 14.18%, respectively, for the comparable periods of 2022. FNCB declared and paid dividends to shareholders of common stock of $0.090 per share for the second quarter of 2023 and $0.180 per share for the six months ended June 30, 2022, a 20.0% increase, compared to $0.075 per share and $0.150 per share for the same periods of 2022. 

Second quarter 2023 performance: 

	●	Second quarter net income was $2.8 million, or $0.14 per share, compared to $5.7 million, or $0.29 per share for the second quarter of 2022;
	●	Yield on earning assets (FTE) increased 109 basis points to 4.67% for the second quarter of 2023 from 3.58% for the same quarter of 2022, and improved 22 basis points on a linked-quarter basis from 4.45% for the first quarter of 2023;
	●	Cost of funds increased 223 basis points to 2.45% from 0.22% comparing the second quarters of 2023 and 2022, and increased 30 basis points on a linked-quarter basis from 2.15% for the first quarter of 2023;
	●	Net interest margin (FTE) contracted 67 basis points to 2.75% for the second quarter of 2023, compared to 3.42% for the same period of 2022, and contracted 3 basis points on a linked-quarter basis from 2.78% for the first quarter of 2023;
	●	Efficiency ratio was 68.11% for the second quarter of 2023 compared to 53.35% for the second quarter of 2022.

Summary financial position at June 30, 2023 as compared to December 31, 2022:

	●	Total assets increased $116.3 million, or 6.7%, to $1.862 billion at June 30, 2023 from $1.746 billion at December 31, 2022;
	●	Net loans and leases increased $77.6 million, or 7.0%, to $1.188 billion at June 30, 2023 from $1.110 billion at December 31, 2022;
	●	Total deposits increased $55.4 million, or 3.9% to $1.476 billion at June 30, 2023 from $1.421 billion at December 31, 2022;
	●	Non-performing loans as a percentage of total loans were 0.31% at June 30, 2023 and 0.25% at December 31, 2022;
	●	The Bank was well capitalized with total risk-based capital and leverage ratios of 12.97% and 8.98%, respectively, at June 30, 2023, and 13.10% and 8.77%, respectively, at December 31, 2022.

"FNCB's second quarter earnings continued to be impacted by margin compression brought on by the challenging rate environment and increased competition for deposits in our market area," commented FNCB President and CEO, Gerard A. Champi. "Management is actively engaged in managing interest rate risk, controlling funding costs and non-interest expense. On a positive note, we are beginning to see our margins stabilize, while our asset quality and liquidity positions remain strong," concluded Champi.

Summary Results 

Net interest income on a tax-equivalent basis decreased $2.0 million, or 14.4%, to $11.9 million for the three months ended June 30, 2023, from $13.9 million for the comparable period of 2022, which resulted from an increase in interest expense, partially offset by an increase in tax-equivalent interest income. The increase in both interest expense and tax-equivalent interest income were largely due to changes in market rates stemming from the ten FOMC rate increases beginning March 17, 2022 through June 30, 2023.  FNCB's tax-equivalent net interest margin compressed 67 basis points to 2.75% for the second quarter of 2023 from 3.42% for the same quarter of 2022. Additionally, the net interest spread declined 114 basis points to 2.22% for the three months ended June 30, 2023, from 3.36% for the same three months of 2022. The reduction in margin and spread largely reflected the rapid increase in funding costs that outpaced the increase in yield on average earning assets. However, on a linked-quarter basis, margins have appeared to stabilize. The tax-equivalent net interest margin declined only 3 basis points from 2.78% for the first quarter of 2023. Interest expense increased $7.6 million, to $8.3 million for the second quarter of 2023 from $0.7 million for the same quarter of 2022. The increase was largely caused by higher deposit and borrowing costs, coupled with greater reliance on higher-costing wholesale funding. FNCB's average deposit costs increased 195 basis points to 2.08% for the second quarter of 2023 compared to 0.13% for the same quarter of 2022. Average borrowed funds, specifically advances through the FHLB of Pittsburgh and the Federal Reserve Bank's Bank Term Funding Program, increased $62.9 million to $176.8 million from $113.9 million comparing the three months ended June 30, 2023, and 2022, respectively. Moreover, the average cost of borrowed funds increased 379 basis points to 4.89% for the second quarter of 2023 from 1.10% for the same quarter of 2022.  Average interest-bearing deposits increased $77.3 million, or 7.0%, to $1.179 billion from $1.102 billion, comparing the second quarters of 2023 and 2022, respectively. However, FNCB experienced some deposit migration from non-maturity deposits and non-interest-bearing deposits into time deposits, as customers have become increasingly rate-sensitive. Average interest-bearing demand deposits decreased $112.9 million, or 14.2%, to $683.9 million for the second quarter of 2023 compared to $796.8 million for the same quarter of 2022, while average savings deposits decreased $6.6 million to $137.3 million from $143.9 million comparing the three months ended June 30, 2023 and 2022, respectively.  Additionally, non-interest-bearing demand deposits decreased $35.4 million, or 11.1%, to $284.1 million for the second quarter of 2023 from $319.5 million for the respective quarter of 2022. Conversely, average time deposits increased $196.8 million, or 122.1%, to $358.1 million for the three months ended June 30, 2023, from $161.3 million for the same three months of 2022, which reflected special certificate of deposit rate promotions offered during the first quarter of 2023. Tax-equivalent interest income increased $5.6 million, or 38.8%, to $20.2 million from $14.6 million comparing the second quarter of 2023 and 2022, respectively, which largely reflected higher earning-asset yields, coupled with an increase in average earning-asset volumes. The tax-equivalent yield on average earning assets increased 109 basis points to 4.67% for the three months ended June 30, 2023, from 3.58% for the same three months of 2022. Specifically, the tax-equivalent yield on the loan portfolio increased 122 basis points to 5.42% for the second quarter of 2023 from 4.20% for the same quarter of 2022. In addition, the tax-equivalent yield on the investment portfolio increased 56 basis points to 2.98% for the second quarter of 2023 from 2.42% for the same quarter of 2022. Regarding asset volumes, total average earning assets increased $106.5 million, or 6.6%, to $1.731 billion for the three months ended June 30, 2023, from $1.625 billion for the same three months of 2022. Specifically, average total loans and leases increased $110.2 million, or 10.3%, to $1.178 billion for the second quarter of 2023 from $1.067 billion for the same quarter of 2022, which was largely due to strong organic loan demand concentrated in commercial equipment financing. Conversely, total securities averaged $533.1 million for the second quarter of 2023, a decrease of $19.8 million, or 3.6%, from $552.9 million for the second quarter of 2022, as proceeds from sales and repayments of securities were redirected into higher-yielding loan products. 

On a year-to-date basis, tax equivalent net interest income decreased $3.2 million, or 11.8%, to $23.7 million for the six months ended June 30, 2023, from $26.9 million for the comparable period of 2022. Similar to the quarterly period, the decrease in tax-equivalent net interest income for the year-to-date period, reflected an increase in interest expense of $14.3 million, to $15.4 million, compared to $1.1 million for the same period of 2022.  Partially offsetting this was an $11.1 million, or 39.8%, increase in tax-equivalent interest income to $39.1 million for the six months ended June 30, 2023 from $28.0 million for the six months ended June 30, 2022. Tax equivalent yield on average earning assets increased 104 basis points, to 4.56% for the first half of 2023, from 3.52% for the same period in 2022. In addition, total average earning assets increased to $1.717 billion for the six months ended June 30, 2023, from $1.592 billion, for the same period of 2022, representing an increase of $125.3 million, or 7.9%. Similar to the quarterly period, this was primarily due to an increase in average total loans and leases that increased $123.3 million, or 11.9%, to $1.157 billion for the six months ended June 30, 2023, from $1.034 billion for the same comparable period of 2022. 

For the three months ended June 30, 2023, non-interest income decreased $709 thousand, or 42.8%, to $948 thousand from $1.6 million for the three months ended June 30, 2022. The reduction in non-interest revenue was largely due to unrealized net losses recognized on equity securities, coupled with a decrease in the net gains on the sale of mortgage loans held for sale. Continued stock volatility in the financial service sector during the first half of 2023 resulted in net unrealized losses of $1.0 million on holdings of equity securities, for the three months ended June 30, 2023, compared to $82 thousand in losses on equity securities recorded for the same quarter of 2022. Equity securities are comprised primarily of common and preferred stock of other financial institutions. There were no net gains on the sale of mortgage loans held for sale in the second quarter of 2023, compared to $32 thousand recognized for the three months ended June 30, 2022. These reductions were slightly offset by net gains on the sale of available-for-sale debt securities of $90 thousand for the three months ended June 30, 2023, an increase of $125 thousand compared to a $35 thousand loss on the sale of available-for-sale securities in the second quarter of 2022. Wealth management service revenue generated by 1st Investment Services increased $130 thousand, or 113.0%, to $245 thousand, compared to $115 thousand for the same three-month period of 2022, which resulted primarily from the purchase of Chiaro Investment Services, LLC at the end of the third quarter of 2022. For the six months ended June 30, 2023, non-interest income decreased $828 thousand, or 24.0%, to $2.6 million, compared to $3.4 million for the same period of 2022. FNCB recorded a net loss on equity securities of $1.5 million for the six months ended June 30, 2023, compared to a net loss of $207 thousand recorded for the same six months of 2022.  Partially offsetting the increase in loss recognized on equity securities was a net gain on the sale of available-for-sale debt securities of $252 thousand during the six months ended June 30, 2023, an increase of $287 thousand compared to a net loss on the sale of available-for-sale debt securities of $35 thousand for the same period of 2022. In addition, wealth management services and deposit service charges increased $247 thousand, or 104.7%, and $72 thousand, or 3.4%, respectively, comparing the six months ended June 30, 2023 and 2022.

Non-interest expense decreased $130 thousand, or 1.6%, to $8.1 million for the three months ended June 30, 2023, from $8.2 million for the three months ended June 30, 2022, which primarily reflected a credit for unfunded commitments of $225 thousand for the second quarter of 2023, compared to a provision of $75 thousand, for the respective quarter of 2022, coupled with decreases in bank shares tax, equipment expenses, data processing and advertising expenses. These expense reductions were partially offset by increases in occupancy expenses, regulatory assessments and other operating expenses.  For the second quarter of 2023, occupancy expenses, increased $103 thousand, or 23.0%, compared to the second quarter of 2022, while regulatory assessments and other operating expenses increased $312 thousand and $216 thousand, respectively, in comparing the three months ended June 30, 2023, and 2022. The increase in occupancy expense reflected higher utility costs, while the increase in regulatory assessments was due to higher FDIC insurance rates. Contributing to the increase in other operating expenses were loan-related costs associated with a no closing cost home equity line of credit promotion.  For the six months ended June 30, 2023, non-interest expense increased $247 thousand, or 1.5%, to $17.0 million compared to $16.8 million for the same period of 2022, primarily due to increases in salaries and employee benefits, regulatory assessments, occupancy expense and other operating expenses. Salaries and employee benefits increased $747 thousand, or 8.1%, to $9.9 million for the six months ended June 30, 2023, from $9.2 million for the same period of 2022, which primarily reflected higher full-time salaries and benefits associated with staff additions, in addition to increases in starting salaries and salary ranges, to stay competitive in attracting and retaining qualified staff. For the six months ended June 30, 2023, regulatory assessments increased $104 thousand, or 24.6%, compared to the same six-month period of 2022, while occupancy and other operating expenses increased $76 thousand, or 7.6%, and $452 thousand, or 31.8%, respectively, comparing the six months ended June 30, 2023, and 2022.The increase in other operating expenses, was largely due to increases in correspondent bank charges and servicing costs associated with purchased loan pools, coupled with costs associated with the home equity line of credit promotion. Similar to the quarterly period, these increases were slightly offset by decreases in the provision for unfunded commitments, bank shares tax, equipment and data processing expenses. Year-to-date, FNCB recorded a credit for unfunded commitments of $494 thousand, compared to a provision of $123 thousand for the six months ended June 2022.

Asset Quality

Total non-performing loans slightly increased $0.9 million, or 32.3%, to $3.8 million, representing 0.31% of total loans and leases, at June 30, 2023, from $2.8 million, or 0.25% of total loans and leases, at December 31, 2022. Year-over-year, non-performing loans increased $1.0 million, or 35.3%, from $2.8 million, or 0.26% of total loans, at June 30, 2022. FNCB’s loan delinquency rate (total delinquent loans as a percentage of total loans) slightly increased to 0.50% at June 30, 2023, compared to 0.45% at December 31, 2022, and 0.39% at June 30, 2022. FNCB recorded a provision for credit losses of $799 thousand for the second quarter of 2023 compared to a provision of $62 thousand for the same quarter of 2022. For the six months ended June 30, 2023, the provision for credit losses totaled $1.8 million, compared to $0.8 million provision for credit losses, for the same six-month period of 2022. The increases in the quarter and the year-to-date periods, were primarily attributable to increases in loan and lease volumes. The allowance for credit losses was $12.9 million, or 1.07% of total loans and leases, at June 30, 2023, which included a $2.6 million adjustment to the ACL on loans, related to the adoption of CECL. At December 31, 2022, allowance for loan and lease losses was $14.2 million, or 1.26% of total loans and leases.

Financial Condition

Total assets increased $116.3 million, or 6.7%, to $1.862 billion at June 30, 2023, from $1.746 billion at December 31, 2022. The change in total assets primarily reflected increases in loans and leases, net of the ACL, and cash and cash equivalents, partially offset by decreases in available-for-sale debt securities as security repayments were re-directed to fund loan originations. Loans and leases, net of the ACL, increased $77.6 million, or 7.0%, to $1.188 billion at June 30, 2023, from $1.110 billion at December 31, 2022. Increases were experienced across the commercial and industrial loans, construction, land and acquisition and development and state and political subdivision loans, which primarily reflected commercial equipment financing originations. Cash and cash equivalents increased $63.1 million, or 150.5%, to $105.0 million at June 30, 2023, from $41.9 million at December 31, 2022, while available-for-sale debt securities decreased $23.2 million, or 4.9%, to $452.9 million at June 30, 2023, from $476.1 million at December 31, 2022. Total deposits increased $55.4 million, or 3.9%, to $1.476 billion at June 30, 2023, from $1.421 billion at December 31, 2022. FNCB continued to utilize and secure liquidity through the brokered deposit market. Additionally, FNCB continued to experience migration from non-maturity deposits, non-interest-bearing and interest-bearing demand and savings deposits, into time deposits and increased utilization of brokered deposits. Total non-maturity deposits decreased $143.2 million, or 11.3%, to $1.120 billion at June 30, 2023 from $1.263 billion at December 31, 2022. Total time deposits increased $198.6 million, or 125.8%, to $356.5 million at the end of the second quarter of 2023 from $157.9 million at December 31, 2022. Included in time deposits at June 30, 2023 were brokered deposits of $126.2 million, an increase of $102.3 million from $23.9 million at December 31, 2022. Total borrowed funds increased $59.6 million to $242.0 million at June 30, 2023, from $182.4 million at December 31, 2022, which was due to additional advances through the FHLB of Pittsburgh and the Federal Reserve Discount Window Bank Term Funding Program. 

Total shareholders’ equity increased $5.1 million, or 4.3%, to $124.0 million at June 30, 2023, from $118.9 million at December 31, 2022. The increase in capital was primarily due to net income for the six months ended June 30, 2023 of $5.5 million. Also impacting capital was market value appreciation of FNCB's available-for-sale debt securities, net of deferred taxes, which was the primary cause of a $1.8 million reduction in the accumulated other comprehensive loss to $46.2 million at June 30, 2023, compared to an accumulated other comprehensive loss of $48.0 million at December 31, 2022.  Partially offsetting these capital increases were $3.5 million in dividends declared and paid for the six months ended June 30, 2023. Tangible book value was $6.28 per share at June 30, 2023, compared to $6.04 per share at December 31, 2022. FNCB Bank was considered well capitalized with total risk-based capital and Tier 1 leverage ratios of 12.97% and 8.98%, respectively, at June 30, and 13.10% and 8.77%, respectively, at December 31, 2022.

Availability of Filings

Copies of FNCB’s most recent Annual Report on Form 10-K and Quarterly Reports on form 10-Q will be provided upon request from: Shareholder Relations, FNCB Bancorp, Inc., 102 East Drinker Street, Dunmore, PA 18512 or by calling (570) 348-6419. FNCB’s SEC filings including its Annual Report on Form 10-K and Quarterly Reports on Form 10-Q are also available free of charge on the Investor Relations page of FNCB’s website, www.fncb.com, and on the SEC website at: http://www.sec.gov/edgar/searchedgar/companysearch.html

About FNCB Bancorp, Inc.:

FNCB Bancorp, Inc. is the bank holding company of FNCB Bank. Locally-based for over 113 years, FNCB Bank continues as a premier community bank in Northeastern Pennsylvania – offering a full suite of personal, small business and commercial banking solutions with industry-leading mobile, online and in-branch products and services. FNCB currently operates through 16 community offices located in Lackawanna, Luzerne and Wayne Counties and remains dedicated to making its customers’ banking experience simply better. For more information about FNCB, visit www.fncb.com.

INVESTOR CONTACT:

James M. Bone, Jr., CPAExecutive Vice President and Chief Financial Officer               FNCB Bank(570) 348-6419james.bone@fncb.com

FNCB may from time to time make written or oral “forward-looking statements,” including statements contained in our filings with the Securities and Exchange Commission (“SEC”), in our reports to shareholders, and in our other communications, which are made in good faith by us pursuant to the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995.

These forward-looking statements include statements with respect to FNCB’s beliefs, plans, objectives, goals, expectations, anticipations, estimates and intentions, including statements with respect to new product offerings, that are subject to significant risks and uncertainties, and are subject to change based on various factors (some of which are beyond our control). The words “may,” “could,” “should,” “will,” “would,” “believe,” “anticipate,” “estimate,” “expect,” “intend,” “plan,” “project,” “future” and similar expressions are intended to identify forward-looking statements. The following factors, among others, could cause FNCB’s financial performance to differ materially from the plans, objectives, expectations, estimates and intentions expressed in such forward-looking statements: government intervention in the U.S. financial system including the effects of recent legislative, tax, accounting and regulatory actions and reforms; political instability; the ability of FNCB to manage credit risk; weakness in the economic environment, in general, and within FNCB’s market area; the deterioration of one or a few of the commercial real estate loans with relatively large balances contained in FNCB’s loan portfolio; greater risk of loan defaults and losses from concentration of loans held by FNCB, including those to insiders and related parties; if FNCB’s portfolio of loans to small and mid-sized community-based businesses increases its credit risk; if FNCB’s allowance for credit losses ("ACL") is not sufficient to absorb actual losses or if increases to the ACL were required; FNCB is subject to interest-rate risk and any changes in interest rates could negatively impact net interest income or the fair value of FNCB's financial assets; if management concludes that the decline in value of any of FNCB’s investment securities is caused by a credit-related event could result in FNCB recording an impairment loss; if FNCB’s risk management framework is ineffective in mitigating risks or losses to FNCB; if FNCB is unable to successfully compete with others for business; a loss of depositor confidence resulting from changes in either FNCB’s financial condition or in the general banking industry; if FNCB is unable to retain or grow its core deposit base; inability or insufficient dividends from its subsidiary, FNCB Bank; if FNCB loses access to wholesale funding sources; interruptions or security breaches of FNCB’s information systems; any systems failures or interruptions in information technology and telecommunications systems of third parties on which FNCB depends; security breaches; if FNCB’s information technology is unable to keep pace with growth or industry developments or if technological developments result in higher costs or less advantageous pricing; the loss of management and other key personnel; dependence on the use of data and modeling in both its management’s decision-making generally and in meeting regulatory expectations in particular; additional risk arising from new lines of business, products, product enhancements or services offered by FNCB; inaccuracy of appraisals and other valuation techniques FNCB uses in evaluating and monitoring loans secured by real property and other real estate owned; unsoundness of other financial institutions; damage to FNCB’s reputation; defending litigation and other actions; dependence on the accuracy and completeness of information about customers and counterparties; risks arising from future expansion or acquisition activity; environmental risks and associated costs on its foreclosed real estate assets; any remediation ordered, or adverse actions taken, by federal and state regulators, including requiring FNCB  to act as a source of financial and managerial strength for the FNCB Bank in times of stress;  costs arising from extensive government regulation, supervision and possible regulatory enforcement actions; new or changed legislation or regulation and regulatory initiatives; noncompliance and enforcement action with the Bank Secrecy Act and other anti-money laundering statutes and regulations; failure to comply with numerous "fair and responsible banking" laws; any violation of laws regarding privacy, information security and protection of personal information or another incident involving personal, confidential or proprietary information of individuals; any rulemaking changes implemented by the Consumer Financial Protection Bureau; inability to attract and retain its highest performing employees due to potential limitations on incentive compensation contained in proposed federal agency rulemaking; any future increases in FNCB Bank’s FDIC deposit insurance premiums and assessments; and the success of FNCB at managing the risks involved in the foregoing and other risks and uncertainties, including those detailed in FNCB’s filings with the SEC.

FNCB cautions that the foregoing list of important factors is not all inclusive. Readers are also cautioned not to place undue reliance on any forward-looking statements, which reflect management’s analysis only as of the date of this report, even if subsequently made available by FNCB on its website or otherwise. FNCB does not undertake to update any forward-looking statement, whether written or oral, that may be made from time to time by or on behalf of FNCB to reflect events or circumstances occurring after the date of this press release. Readers should carefully review the risk factors described in the Annual Report and other documents that FNCB periodically files with the SEC, including its Form 10-K for the year ended December 31, 2022 and Form 10-K for the quarter ended March 31, 2023.

FNCB Bancorp, Inc.

Selected Financial Data

		Jun 30,				Mar 31,				Dec 31,				Sept 30,				Jun 30,
		2023				2023				2022				2022				2022
Per share data:
Net income (fully diluted)		$	0.14			$	0.14			$	0.24			$	0.28			$	0.29
Cash dividends declared		$	0.090			$	0.090			$	0.090			$	0.090			$	0.075
Book value		$	6.28			$	6.43			$	6.04			$	5.67			$	6.38
Tangible book value		$	6.28			$	6.43			$	6.04			$	5.67			$	6.38
Market value:
High		$	6.82			$	9.00			$	8.70			$	8.65			$	10.02
Low		$	5.45			$	6.09			$	7.34			$	7.49			$	7.36
Close		$	5.97			$	6.20			$	8.21			$	7.51			$	8.00
Common shares outstanding			19,750,092				19,683,873				19,681,644				19,680,474				19,675,557
Selected ratios:
Annualized return on average assets			0.63	%			0.62	%			1.13	%			1.26	%			1.37	%
Annualized return on average shareholders' equity			8.89	%			8.84	%			17.40	%			16.95	%			17.57	%
Efficiency ratio			68.11	%			67.69	%			59.37	%			54.88	%			53.35	%
Tier I leverage ratio (FNCB Bank)			8.98	%			8.96	%			8.77	%			9.38	%			9.32	%
Total risk-based capital to risk-adjusted assets (FNCB Bank)			12.97	%			12.97	%			13.10	%			14.16	%			13.90	%
Average shareholders' equity to average total assets			7.07	%			6.96	%			6.50	%			7.44	%			7.80	%
Yield on earning assets (FTE)			4.67	%			4.45	%			4.23	%			3.87	%			3.58	%
Cost of funds			2.45	%			2.15	%			1.19	%			0.59	%			0.22	%
Net interest spread (FTE)			2.22	%			2.30	%			3.04	%			3.28	%			3.36	%
Net interest margin (FTE)			2.75	%			2.78	%			3.32	%			3.43	%			3.42	%
Total delinquent loans/total loans			0.50	%			0.40	%			0.44	%			0.43	%			0.39	%
Allowance for credit losses/total loans			1.07	%			1.06	%			1.26	%			1.24	%			1.23	%
Non-performing loans/total loans			0.31	%			0.23	%			0.25	%			0.25	%			0.26	%
Annualized net charge-offs (recoveries)/average loans			0.07	%			0.09	%			0.09	%			0.03	%			(0.07	%)

FNCB Bancorp, Inc.

Year-to-Date Consolidated Statements of Income

		Six Months Ended
		June 30,
(in thousands, except share data)		2023				2022
Interest income
Interest and fees on loans and leases		$	30,418			$	21,202
Interest and dividends on securities:
Taxable			6,141				4,792
Tax-exempt			1,131				1,270
Dividends			496				190
Total interest and dividends on securities			7,768				6,252
Interest on interest-bearing deposits in other banks			429				15
Total interest income			38,615				27,469
Interest expense
Interest on deposits			10,522				670
Interest on borrowed funds
Federal Reserve Discount Window advances			92				-
Federal Home Loan Bank of Pittsburgh advances			4,447				273
Junior subordinated debentures			340				121
Total interest on borrowed funds			4,879				394
Total interest expense			15,401				1,064
Net interest income before provision for credit losses			23,214				26,405
Provision for credit losses			1,774				821
Net interest income after provision for credit losses			21,440				25,584
Non-interest income
Deposit service charges			2,187				2,115
Net gain (loss) on the sale of available-for-sale debt securities			252				(35	)
Net loss on equity securities			(1,540	)			(207	)
Net gain on the sale of mortgage loans held for sale			1				32
Loan-related fees			171				107
Income from bank-owned life insurance			402				342
Merchant services revenue			318				371
Wealth management services revenue			483				236
Other			345				486
Total non-interest income			2,619				3,447
Non-interest expense
Salaries and employee benefits			9,924				9,177
Occupancy expense			1,071				995
Equipment expense			504				640
Advertising expense			397				359
Data processing expense			1,950				2,072
Regulatory assessments			525				421
Bank shares tax			412				716
Professional fees			516				540
(Credit) provision for unfunded commitments			(494	)			123
Other operating expenses			2,218				1,733
Total non-interest expense			17,023				16,776
Income before income taxes			7,036				12,255
Income tax expense			1,568				2,164
Net income		$	5,468			$	10,091
Income per share
Basic		$	0.28			$	0.51
Diluted		$	0.28			$	0.51
Cash dividends declared per common share		$	0.180			$	0.150
Weighted average number of shares outstanding:
Basic			19,698,837				19,805,485
Diluted			19,703,089				19,832,405

FNCB Bancorp, Inc.

Quarter-to-Date Consolidated Statements of Income

		Three Months Ended
		Jun 30,				Mar 31,				Dec 31,				Sept 30,				Jun 30,
(in thousands, except share data)		2023				2023				2022				2022				2022
Interest income
Interest and fees on loans and leases		$	15,853			$	14,565			$	13,721			$	12,270			$	11,100
Interest and dividends on securities
Taxable			3,064				3,077				2,856				2,633				2,402
Tax-exempt			544				587				701				691				658
Dividends			223				273				196				163				112
Total interest and dividends on securities			3,831				3,937				3,753				3,487				3,172
Interest on interest-bearing deposits in other banks			252				177				57				19				8
Total interest income			19,936				18,679				17,531				15,776				14,280
Interest expense
Interest on deposits			6,145				4,377				2,299				1,001				346
Interest on borrowed funds
Federal Reserve Bank Discount Window advances			92				-				3				-				-
Federal Home Loan Bank of Pittsburgh advances			1,896				2,551				1,392				736				242
Junior subordinated debentures			174				166				138				99				70
Total interest on borrowed funds			2,162				2,717				1,533				835				312
Total interest expense			8,307				7,094				3,832				1,836				658
Net interest income before provision for credit losses			11,629				11,585				13,699				13,940				13,622
Provision for credit losses			799				975				628				513				62
Net interest income after provision for credit losses			10,830				10,610				13,071				13,427				13,560
Non-interest income
Deposit service charges			1,123				1,064				1,167				1,133				1,065
Net gain (loss) on the sale of available-for-sale debt securities			90				162				(188	)			-				(35	)
Net (loss) gain on equity securities			(1,032	)			(508	)			87				86				(82	)
Net gain on the sale of mortgage loans held for sale			-				1				82				91				32
Loan-related fees			52				119				82				54				50
Income from bank-owned life insurance			205				197				168				200				197
Bank-owned life insurance settlement			-				-				273				-				-
Merchant services revenue			157				161				168				173				172
Wealth management services revenue			245				238				218				109				115
Other			108				237				336				295				143
Total non-interest income			948				1,671				2,393				2,141				1,657
Non-interest expense
Salaries and employee benefits			4,529				5,395				5,525				4,581				4,519
Occupancy expense			550				521				581				517				447
Equipment expense			232				272				341				314				316
Advertising expense			188				209				240				202				227
Data processing expense			952				998				981				974				1,009
Regulatory assessments			312				213				160				230				196
Bank shares tax			263				149				(176	)			375				375
Professional fees			214				302				436				297				213
(Credit) provision for unfunded commitments			(225	)			(269	)			(95	)			338				75
Other operating expenses			1,087				1,131				1,673				1,204				855
Total non-interest expense			8,102				8,921				9,666				9,032				8,232
Income before income taxes			3,676				3,360				5,798				6,536				6,985
Income tax expense			871				697				879				1,101				1,247
Net income		$	2,805			$	2,663			$	4,919			$	5,435			$	5,738
Income per share
Basic		$	0.14			$	0.14			$	0.25			$	0.28			$	0.29
Diluted		$	0.14			$	0.14			$	0.24			$	0.28			$	0.29
Cash dividends declared per common share		$	0.090			$	0.090			$	0.090			$	0.090			$	0.075
Weighted average number of shares outstanding:
Basic			19,715,136				19,682,357				19,681,437				19,687,766				19,677,109
Diluted			19,715,136				19,690,859				19,690,676				19,697,047				19,694,125

FNCB Bancorp, Inc.

Consolidated Balance Sheets

		Jun 30,				Mar 31,				Dec 31,				Sept 30,				Jun 30,
(in thousands)		2023				2023				2022				2022				2022
Assets
Cash and cash equivalents:
Cash and due from banks		$	32,893			$	20,418			$	26,588			$	29,231			$	23,355
Interest-bearing deposits in other banks			72,107				49,153				15,328				4,896				4,037
Total cash and cash equivalents			105,000				69,571				41,916				34,127				27,392
Available-for-sale debt securities			452,877				473,119				476,091				472,451				495,604
Equity securities, at fair value			6,337				7,369				7,717				5,496				5,307
Restricted stock, at cost			9,325				8,482				8,545				4,838				5,787
Loans held for sale			-				-				60				248				667
Loans and leases, net of deferred loan fees and costs and unearned income			1,200,595				1,163,789				1,124,317				1,111,230				1,088,748
Allowance for credit losses			(12,873	)			(12,279	)			(14,193	)			(13,819	)			(13,381	)
Net loans and leases			1,187,722				1,151,510				1,110,124				1,097,411				1,075,367
Bank premises and equipment, net			15,028				15,316				15,616				15,526				15,619
Accrued interest receivable			6,329				6,143				5,957				5,629				5,103
Bank-owned life insurance			36,901				36,696				36,499				37,036				36,836
Other assets			42,353				41,275				43,005				31,754				25,403
Total assets		$	1,861,872			$	1,809,481			$	1,745,530			$	1,704,516			$	1,693,085
Liabilities
Deposits:
Demand (non-interest-bearing)		$	285,674			$	281,114			$	305,850			$	320,879			$	317,725
Interest-bearing			1,190,390				1,182,192				1,114,797				1,181,747				1,109,219
Total deposits			1,476,064				1,463,306				1,420,647				1,502,626				1,426,944
Borrowed funds			242,022				196,648				182,360				76,010				128,360
Accrued interest payable			1,089				848				171				101				85
Other liabilities			18,638				22,185				23,403				14,187				12,184
Total liabilities			1,737,813				1,682,987				1,626,581				1,592,924				1,567,573
Shareholders' equity
Preferred stock			-				-				-				-				-
Common stock			24,687				24,604				24,602				24,600				24,594
Additional paid-in capital			77,757				77,636				77,502				77,381				77,233
Retained earnings			67,851				66,834				64,873				61,737				58,085
Accumulated other comprehensive income			(46,236	)			(42,580	)			(48,028	)			(52,126	)			(34,400	)
Total shareholders' equity			124,059				126,494				118,949				111,592				125,512
Total liabilities and shareholders’ equity		$	1,861,872			$	1,809,481			$	1,745,530			$	1,704,516			$	1,693,085

FNCB Bancorp, Inc.

Summary Tax-equivalent Net Interest Income

		Three Months Ended
		Jun 30,				Mar 31,				Dec 31,				Sept 30,				Jun 30,
(dollars in thousands)		2023				2023				2022				2022				2022
Interest income
Loans and leases:
Loans and leases - taxable		$	15,411			$	14,145			$	13,328			$	11,870			$	10,743
Loans and leases - tax-free			559				532				498				506				452
Total loans			15,970				14,677				13,826				12,376				11,195
Securities:
Securities, taxable			3,287				3,350				3,052				2,796				2,514
Securities, tax-free			689				743				888				875				833
Total interest and dividends on securities			3,976				4,093				3,940				3,671				3,347
Interest-bearing deposits in other banks			252				177				57				19				8
Total interest income			20,198				18,947				17,823				16,066				14,550
Interest expense
Deposits			6,145				4,377				2,299				1,001				346
Borrowed funds			2,162				2,717				1,533				835				312
Total interest expense			8,307				7,094				3,832				1,836				658
Net interest income		$	11,891			$	11,853			$	13,991			$	14,230			$	13,892
Average balances
Earning assets:
Loans and leases:
Loans and leases - taxable		$	1,122,385			$	1,082,830			$	1,069,260			$	1,045,474			$	1,013,899
Loans and leases - tax-free			55,142				54,045				56,064				57,099				53,471
Total loans			1,177,527				1,136,875				1,125,324				1,102,573				1,067,370
Securities:
Securities, taxable			438,157				449,351				439,998				438,339				442,998
Securities, tax-free			94,964				99,836				114,128				113,629				109,948
Total securities			533,121				549,187				554,126				551,968				552,946
Interest-bearing deposits in other banks			20,620				17,068				6,185				4,634				4,488
Total interest-earning assets			1,731,268				1,703,130				1,685,635				1,659,175				1,624,804
Non-earning assets			57,463				51,930				39,355				51,847				55,303
Total assets		$	1,788,731			$	1,755,060			$	1,724,990			$	1,711,022			$	1,680,107
Interest-bearing liabilities:
Deposits		$	1,179,288			$	1,096,758			$	1,138,817			$	1,118,909			$	1,101,947
Borrowed funds			176,838				223,694				144,995				130,481				113,932
Total interest-bearing liabilities			1,356,126				1,320,452				1,283,812				1,249,390				1,215,879
Demand deposits			284,053				287,975				309,372				318,656				319,505
Other liabilities			22,030				24,487				19,659				15,742				13,730
Shareholders' equity			126,522				122,146				112,147				127,234				130,993
Total liabilities and shareholders' equity		$	1,788,731			$	1,755,060			$	1,724,990			$	1,711,022			$	1,680,107
Yield/Cost
Earning assets:
Loans and leases:
Interest and fees on loans and leases - taxable			5.49	%			5.23	%			4.99	%			4.54	%			4.24	%
Interest and fees on loans and leases - tax-free			4.05	%			3.94	%			3.56	%			3.54	%			3.38	%
Total loans			5.42	%			5.16	%			4.91	%			4.49	%			4.20	%
Securities:
Securities, taxable			3.00	%			2.98	%			2.77	%			2.55	%			2.27	%
Securities, tax-free			2.90	%			2.98	%			3.11	%			3.08	%			3.03	%
Total securities			2.98	%			2.98	%			2.84	%			2.66	%			2.42	%
Interest-bearing deposits in other banks			4.89	%			4.15	%			3.69	%			1.64	%			0.71	%
Total earning assets			4.67	%			4.45	%			4.23	%			3.87	%			3.58	%
Interest-bearing liabilities:
Interest on deposits			2.08	%			1.60	%			0.81	%			0.36	%			0.13	%
Interest on borrowed funds			4.89	%			4.86	%			4.23	%			2.56	%			1.10	%
Total interest-bearing liabilities			2.45	%			2.15	%			1.19	%			0.59	%			0.22	%
Net interest spread			2.22	%			2.30	%			3.04	%			3.28	%			3.36	%
Net interest margin			2.75	%			2.78	%			3.32	%			3.43	%			3.42	%

FNCB Bancorp, Inc.

Asset Quality Data

		Jun 30,				Mar 31,				Dec 31,				Sept 30,				Jun 30,
(in thousands)		2023				2023				2022				2022				2022
At period end
Non-accrual loans and leases		$	3,711			$	2,601			$	2,763			$	2,654			$	2,764
Loans past due 90 days or more and still accruing			49				52				78				74				14
Total non-performing loans and leases			3,760				2,653				2,841				2,728				2,778
Other real estate owned (OREO)			-				-				-				228				228
Other non-performing assets			1,647				1,773				1,773				1,773				1,773
Total non-performing assets		$	5,407			$	4,426			$	4,614			$	4,729			$	4,779
For the three months ended
Allowance for credit losses
Beginning balance, prior to adoption of ASU 2016-13		$	12,279			$	14,193			$	13,819			$	13,381			$	13,129
Impact of ASU 2016-13			-				(2,636	)			-				-				-
Loans and leases charged-off			553				776				497				411				303
Recoveries of charged-off loans and leases			348				523				243				336				493
Net charge-offs (recoveries)			205				253				254				75				(190	)
Provision for credit losses			799				975				628				513				62
Ending balance		$	12,873			$	12,279			$	14,193			$	13,819			$	13,381