First National Community Bancorp reported $1.7 million profit in the first quarter, a turnaround from the year-ago quarter when the bank racked up a $1.2 million loss.
The bulk of the profit came from recovery of $1.5 million from loans the bank had written off. While the recovery provided a one-shot boost, bank officials say underlying finances are more stable and improving.
"We are pretty happy with where we are at," said bank Chief Financial Officer James M. Bone Jr. "We are working hard to execute the plan and sustain the profitability of the bank."
He cited the bank's solid asset quality. Loan delinquencies, for example, are better at FNCB than peer banks, a sign of how aggressively FNCB wrote down or wrote off loans in past quarters. Noninterest expenses fell by $1.6 million compared to the year-ago period, thanks to a decrease in consultants helping the bank stabilize, Mr. Bone said.
The bank did not have an annual shareholders meeting, typically in May, to discuss bank performance. The bank didn't have a meeting last year, either. Mr. Bone said the bank hopes to announce a shareholder meeting soon, the first since 2011.
Turning a corner?
For a time, the trend line for FNCB looked good. The bank narrowed whopping losses of $44.3 million in 2009 and $31.7 million in 2010 to a manageable $335,000 loss in 2011. Losses surged back into the tens of millions in 2012 with $13.7 million of red ink, raising questions about the bank's ability to remain independent. The company hasn't ended a year with a profit since 2008.
But the first-quarter results boosted bank officers' confidence.
"In banking there can always be something lurking in the weeds that you don't know about," Mr. Bone said. "But if we knew about it, we would have written it down and accounted for it."
It's not all rainbows and roses.
The bank's insurance company, Fidelity and Deposit Co. of Maryland, sued FNCB last year to retroactively rescind its policy covering bank directors and officers, claiming the bank made misleading statements on its application. That coverage could provide settlement money for the bank to end a shareholder lawsuit against present and former directors of the company and the bank's former auditor, Demetrius & Co.
DeNaples Return?
Long-time chairman of the board of directors, Louis DeNaples, won an unexpected victory in federal court last month, successfully overturning a ban from banking the Federal Reserve Bank and the Office of the Comptroller of the Currency imposed on him. He has been on a leave of absence from the board.
Bank officials said they are not aware of any changes on the board of directors. Some observers, and certainly shareholders, excuse the lending excess that occurred under Mr. DeNaples' watch that plunged the bank in crisis. They view the businessman and casino owner as a benefit to the bank.
Regulators, however, have a different idea.
"The regulators don't want him there," said Wilson Smith, a bank equities analyst with Patriot Capital Partners. "His return could complicate the relationship between regulators and the bank."
The bank is operating under a strict, open-ended consent order with regulators. The bank is confident it has met all of the requirements in the order but one: the capital ratio, a key measure of bank stability.
The bank's capital ratio in the first quarter improved after being unchanged for more than a year.
Tier I leverage jumped from 7.2 to 7.7 percent, still short of the 9 percent required. Risk-based ratio climbed from 11.8 percent to 12.3 percent, closer to the required 13 percent.
With improved loan quality and profitability, those numbers will continue to move in the right direction, Mr. Bone said. As capital ratios come within striking distance of regulators' requirements, the bank isn't looking as hard at expensive outside sources of capital from borrowing or investors.
"We've been exploring capital alternatives but as we get closer to 9 and 13, the options we consider change," he said.
Contact the writer: dfalchek@timesshamrock.com