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Note 15 - Regulatory Matters/Subsequent Events

12 Months Ended

Dec. 31, 2022

Regulatory Capital Requirements under Banking Regulations [Text Block]

Note 15. REGULATORY MATTERS/SUBSEQUENT EVENTS

FNCB’s ability to pay dividends to its shareholders, or repurchase shares of its common stock, is largely dependent on the Bank’s ability to pay dividends to FNCB. Bank regulations limit the amount of dividends that may be paid, or shares that may be repurchased, without prior approval of the Bank’s regulatory agency. Cash dividends declared and paid by FNCB during 2022 and 2021 were $0.33 per share and $0.27 per share, respectively. FNCB offers a Dividend Reinvestment and Stock Purchase plan ("DRP") to its shareholders. For the years ended December 31, 2022 and 2021 dividend 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. Shares of common stock issued under the DRP totaled 5,089 and 12,189 for the years ended December 31, 2022 and 2021, respectively. Subsequent to December 31, 2022, on January 25, 2023, FNCB declared a $0.090 per share dividend payable on March 15, 2023 to shareholders of record as of March 1, 2023.

On January 26, 2022, FNCB's Board of Directors authorized a stock repurchase program under which up to 750,000 shares of FNCB's outstanding common stock may be acquired in the open market which commenced on March 4, 2022 and expired on December 31, 2022. On January 25, 2023, FNCB's Board of Directors authorized the repurchase of up to 750,000 shares of FNCB's outstanding common stock under a similar program, which is anticipated to commence on March 3, 2023. Repurchases under both programs are administered through an independent broker and are subjected to SEC regulations as well as certain price, market volume and timing constraints specified in the trading plan. In 2022, FNCB repurchased 384,830 shares at a weighted-average price per share of $9.45, or $3.6 million in aggregate. Repurchases are funded from available working capital and the repurchased shares were returned to the status of authorized but unissued shares of common stock.

The holding company is considered a small bank holding company and is 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 December 31, 2022, that FNCB and the Bank meet all applicable capital adequacy requirements.

Current quantitative measures established by regulation to ensure capital adequacy require FNCB Bank to maintain minimum amounts and ratios (set forth in the table 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 December 31, 2022 and 2021:

FNCB Bank

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

(dollars in thousands)

Amount

Ratio

Ratio

Ratio

Ratio

December 31, 2022

Total capital (to risk-weighted assets)
$ 169,984 13.11
%
8.00
%
10.50
%
10.00
%

Tier I capital (to risk-weighted assets)
154,842 11.94
%
6.00
%
8.50
%
8.00
%

Tier I common equity (to risk-weighted assets)
154,842 11.94
%
4.50
%
7.00
%
6.50
%

Tier I capital (to average assets)
154,842 8.77
%
4.00
%
4.00
%
5.00
%

Total risk-weighted assets
1,296,618

Total average assets
1,765,251

FNCB Bank

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

(dollars in thousands)

Amount

Ratio

Ratio

Ratio

Ratio

December 31, 2021

Total capital (to risk-weighted assets)
$ 161,957 14.64
%
8.00
%
10.50
%
10.00
%

Tier I capital (to risk-weighted assets)
148,958 13.46
%
6.00
%
8.50
%
8.00
%

Tier I common equity (to risk-weighted assets)
148,958 13.46
%
4.50
%
7.00
%
6.50
%

Tier I capital (to average assets)
148,958 8.92
%
4.00
%
4.00
%
5.00
%

Total risk-weighted assets
1,106,636

Total average assets
1,669,932

- Definition

The entire disclosure for regulatory capital requirement for depository and lending institutions. Institutions include, but not are not limited to, finance company, insured depository institution, bank holding company, savings and loan association holding company, bank and savings institution not federally insured, mortgage company, foreign financial institution and credit union.

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