News

February 19

FNCB reports $11.3 million net loss

Bank president said the area institution is well capitalized and continues to make quality loans.

By Jerry Lynott jlynott@timesleader.com
Business Writer

DUNMORE – First National Community Bancorp Inc.’s financial performance swung from positive to negative in the span of two years and finished 2009 with an $11.3 million net loss.

The parent company of First National Community Bank said it allocated $32 million in earnings to cover loan losses from a bad economy and falling real estate values that made it difficult for borrowers to pay on time.

In a prepared statement, J. David Lombardi, bank president and chief executive officer, said FNCB has taken steps to ensure the problems in its loan portfolio will not be an “ongoing factor.”

The bank is well capitalized and continues to make quality loans while other financial institutions struggle to survive, said Lombardi.

But he added, “It will be some time before we see earnings return to their pre-2009 level, and loan problems won’t disappear as quickly as the industry would like.”

A little more than a year ago FNCB reported earnings of $15.1 million for 2008 that were $400,000 better than the previous year.

The bank continued its profitability into 2009, but losses emerged as the year progressed.

David Danielson of the banking advisory firm Danielson Associates of Bethesda, Md., said FNCB “is still profitable on an operating basis, making $2.1 million in the fourth quarter of 2009, compared to $5 million or more in 2008 and the first quarter of 2009.”

However, it’s facing two major issues in high contributions to its loan loss provisions and higher losses in its securities portfolio.

FNCB started to make higher-than-normal contributions to its loan loss reserves in the second quarter, Danielson said. It contributed $11 million to the reserves in each of the third and fourth quarters.

Of the non-accrual loans, he said, 46 percent were in construction and land development.

“The cost of managing troubled assets is incredibly high,” Danielson said.

When the loans are paid on time, a bank simply collects the monthly payments. But when they go bad, a bank has to expend time and money on such things as asset management, appraisals, attorney fees and foreclosure proceedings, he explained.

In its 2009 results release FNCB said its operating expenses increased to $5.4 million over the year, and $2 million of that was for higher Federal Deposit Insurance Corp. premiums.

Added to that was a loss of $6.2 million in securities investments in the second half of 2009.

The 2009 results release was the second of three statements FNCB filed with the Securities and Exchange Commission in three days.

On Thursday, the bank announced William S. Lance, an executive vice president, would resign on Feb. 26.

On Tuesday, the bank amended its bylaws to create the position of vice chairman of the board of directors. The newly created position would assume the duties of chairman of the board in that person’s absence or incapacity.

Louis A. DeNaples voluntarily stepped down from the chairman post in 2008 when he was charged with perjury for statements made under oath to the Pennsylvania Gaming Control Board when he was applying for a license for his Mount Airy Casino Resort.

The charges were withdrawn last year, but the federal Office of the Comptroller of the Currency barred him from returning to the bank board, saying the agreement to withdraw the charges “was based on a crime that involves dishonesty or breach of trust.”

DeNaples, of Dunmore, is challenging the OCC’s prohibition.

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