Note 11 - Regulatory Matters

3 Months Ended

Mar. 31, 2020

Notes to Financial Statements

Regulatory Capital Requirements under Banking Regulations [Text Block]

Note

11

. Regulatory Matters

On

January 28, 2019,

FNCB announced that it had commenced a public offering of shares of its common stock in a firm commitment underwritten offering. The offering closed on

February 8, 2019

and FNCB issued

3,285,550

shares of its common stock, which included

428,550

shares issued upon the exercise in full of the option to purchase additional shares granted to underwriters, at an offering price of

$7.00

per share, less an underwriting discount of

$0.35

per share. FNCB received net proceeds after deducting the underwriting discount and offering expenses of

$21.3

million. Following the receipt of the proceeds, during the

first

quarter of

2019,

FNCB made a capital investment in FNCB Bank, its wholly-owned subsidiary of

$17.8

million.

FNCB’s ability to pay dividends to its shareholders is largely dependent on the Bank’s ability to pay dividends to FNCB. Bank regulations limit the amount of dividends that

may

be paid without prior approval of the Bank’s regulatory agency. For the

three

months ended

March 31, 2020

and

2019,

cash dividends declared and paid by FNCB were

$0.055

 per share and

$0.05

 per share, respectively. FNCB offers a Dividend Reinvestment and Stock Purchase Plan (“DRP”) to its shareholders. For the

three

months ended

March 31, 2020

and

2019

,

 d

ividend reinvestment shares were purchased in open market transactions, however shares under the optional cash purchase feature of the DRP were issued from authorized but unissued common shares. Common shares issued under the DRP for the 

three

months ended

March 31, 2020

and

2019

totaled

2,842

 and

1,639

, respectively. Subsequent to

March 31, 2020

, on

April

 29, 2020,

FNCB declared a cash dividend for the

second

 quarter of

2020

 of

$0.055

 per share, which is payable on

June

15

, 2020

to shareholders of record as of 

June

1, 2020

.

In

2018,

the Federal Reserve increased the asset limit to qualify as a small bank holding company from

$1

billion to

$3

billion. As a result, the Company met the eligibility criteria for a small bank holding company and was exempt from risk-based capital and leverage rules, including Basel III. FNCB and the Bank are subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material adverse effect on FNCB’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, FNCB and the Bank must meet specific capital guidelines that involve quantitative measures of FNCB's and the Bank's assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices. FNCB's and the Bank's capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors. Management believes, as of

March 31, 2020

and

December 31, 2019,

that FNCB and the Bank meet all applicable capital adequacy requirements. In addition, the Bank is required to maintain a "capital conservation buffer," composed entirely of common equity Tier I capital, in addition to minimum risk-based capital ratios, in order to avoid limitations on capital distributions (including dividend payments and certain discretionary bonus payments to executive officers). The required capital conservation buffer is 

2.500%

for

2020

and

2019.

 Management believes the Bank was in full compliance with the additional capital conservation buffer requirement at

March 31, 2020

and

December 31, 2019.

Current quantitative measures established by regulation to ensure capital adequacy require FNCB Bank to maintain minimum amounts and ratios (set forth in the tables below) of Total capital, Tier I capital, and Tier I common equity (as defined in the regulations) to risk-weighted assets (as defined), and of Tier I capital (as defined) to average assets (as defined). The following tables present summary information regarding the Bank’s risk-based capital and related ratios at

March 31, 2020

and 

December 31, 2019

:

	Bank Only					Minimum Required For Capital Adequacy Purposes			Minimum Required For Capital Adequacy Purposes with Conservation Buffer			Minimum Required To Be Well Capitalized Under Prompt Corrective Action Regulations
(in thousands)	Amount		Ratio			Ratio			Ratio			Ratio
March 31, 2020
Total capital (to risk-weighted assets)	$	142,005		15.44	%		8.00	%		10.50	%		10.00	%
Tier I capital (to risk-weighted assets)		131,394		14.29	%		6.00	%		8.50	%		8.00	%
Tier I common equity (to risk-weighted assets)		131,394		14.29	%		4.50	%		7.00	%		6.50	%
Tier I capital (to average assets)		131,394		11.09	%		4.00	%		4.00	%		5.00	%
Total risk-weighted assets		919,761
Total average assets		1,184,972

	Bank Only					Minimum Required For Capital Adequacy Purposes			Minimum Required For Capital Adequacy Purposes with Conservation Buffer			Minimum Required To Be Well Capitalized Under Prompt Corrective Action Regulations
(in thousands)	Amount		Ratio			Ratio			Ratio			Ratio
December 31, 2019
Total capital (to risk-weighted assets)	$	133,406		14.77	%		8.00	%		10.50	%		10.00	%
Tier I capital (to risk-weighted assets)		123,753		13.70	%		6.00	%		8.50	%		8.00	%
Tier I common equity (to risk-weighted assets)		123,753		13.70	%		4.50	%		7.00	%		6.50	%
Tier I capital (to average assets)		123,753		10.36	%		4.00	%		4.00	%		5.00	%
Total risk-weighted assets		903,172
Total average assets		1,194,789