Executive Summary

Net income was $2.8M and diluted EPS $0.14 in Q2 2023, down 51% YoY on margin compression, higher funding costs, and lower non-interest income; ROAA/ROAE were 0.63%/8.89% .
Net interest margin (FTE) contracted to 2.75% (−67 bps YoY; −3 bps linked), while yield on earning assets rose to 4.67% and cost of funds jumped to 2.45% .
Asset quality remained solid: NPLs/total loans 0.31% and ACL/loans 1.07%; efficiency ratio elevated to 68.11% with continued deposit competition and wholesale-funding reliance .
Dividend was maintained at $0.090 per share; management noted margins “beginning to stabilize” with strong asset quality and liquidity .

What Went Well and What Went Wrong

What Went Well

Margin stabilization on a linked-quarter basis (NIM only −3 bps vs Q1) with earning-asset yields up 109 bps YoY to 4.67% .
Asset quality and capital remained strong: NPLs/loans 0.31% and well-capitalized ratios (total risk-based 12.97%, leverage 8.98%) .
Wealth management revenue increased 113% YoY to $0.245M due to the Chiaro Investment Services acquisition, diversifying fee income .

Management quote: “We are beginning to see our margins stabilize, while our asset quality and liquidity positions remain strong.” — Gerard A. Champi, President & CEO .

What Went Wrong

NIM compressed 67 bps YoY to 2.75% as cost of funds rose 223 bps YoY to 2.45%, outpacing yield growth .
Non-interest income fell 43% YoY to $0.95M, driven by $1.03M net unrealized losses on equity securities; no gains on mortgage sales .
Greater reliance on higher-cost wholesale funding: average borrowed funds cost up to 4.89% and volume increased YoY; deposit migration into time deposits raised funding costs .

Financial Results

Metric	Q2 2022	Q1 2023	Q2 2023
Total interest income ($USD Millions)	$14.280	$18.679	$19.936
Total non-interest income ($USD Millions)	$1.657	$1.671	$0.948
Total revenue ($USD Millions)	$15.937	$20.350	$20.884
Net interest margin (FTE, %)	3.42%	2.78%	2.75%
Yield on earning assets (FTE, %)	3.58%	4.45%	4.67%
Cost of funds (%)	0.22%	2.15%	2.45%
Provision for credit losses ($USD Millions)	$0.062	$0.975	$0.799
Net income ($USD Millions)	$5.738	$2.663	$2.805
Diluted EPS ($)	$0.29	$0.14	$0.14

Note: Total revenue computed as Total interest income + Total non-interest income from reported figures .

Earnings vs estimates (Q2 2023):

Metric	Actual	Consensus	Surprise
Diluted EPS ($)	$0.14	N/A (S&P Global consensus unavailable)	N/A
Revenue ($USD Millions)	$20.884	N/A (S&P Global consensus unavailable)	N/A

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Dividend per share ($)	Q2 2023	$0.090 (Q1 2023)	$0.090	Maintained

No formal quantitative guidance (revenue/margins/OpEx/tax) was provided in press releases for Q1 or Q2 2023 .

Earnings Call Themes & Trends

Topic	Previous Mentions (Q4 2022 and Q1 2023)	Current Period (Q2 2023)	Trend
Rate environment & margin	Q4: NIM down vs Q3 as funding costs rose ; Q1: margin/spread compression from rapid rate hikes	NIM further compressed YoY but stabilized linked-quarter (−3 bps)	Stabilizing margin, still pressured
Funding costs & deposit competition	Q1: cost of funds +201 bps YoY; deposit migration to time deposits	Cost of funds +223 bps YoY; continued competition; migration to time deposits/brokered deposits	Elevated pressure persists
Asset quality	Q4: NPLs improved to 0.25% ; Q1: favorable with NPLs 0.23%	NPLs 0.31% and delinquency 0.50%; still low	Stable-to-slightly higher
Liquidity & wholesale funding	Q4/Q1: increased FHLB utilization	Higher funds incl. FHLB and BTFP; borrowed funds $242.0M at 6/30	Elevated reliance
Fee income diversification	Q4: BOLI settlement boosted fees ; Q1: mixed fees	Wealth mgmt revenue +113% YoY; sale of AFS gains offset equity losses	Improving wealth mgmt, volatile securities

Management Commentary

“FNCB's second quarter earnings continued to be impacted by margin compression brought on by the challenging rate environment and increased competition for deposits… we are beginning to see our margins stabilize, while our asset quality and liquidity positions remain strong.” — Gerard A. Champi, President & CEO .
“We remain laser-focused on effective and prudent balance sheet and funding cost management… FNCB's level of uninsured deposits, at approximately 25% of total deposits, is low compared to our peers.” — Gerard A. Champi (Q1 release) .
“Earnings in 2022 benefitted from higher levels of net interest income… we are beginning to experience increased competition within our market.” — Gerard A. Champi (Q4/2022 context) .

Q&A Highlights

No Q2 2023 earnings call transcript was found; therefore, no Q&A themes or guidance clarifications were available in our document set [ListDocuments result: none].

Estimates Context

S&P Global/Capital IQ consensus estimates were unavailable for FNCB for Q2 2023 due to missing CIQ mapping; as a result, comparisons to Wall Street consensus for EPS and revenue cannot be provided (attempted retrieval failed).

Key Takeaways for Investors

Margin stabilization is emerging, but cost of funds remains the main headwind; focus near term should be on deposit mix and pricing discipline as competition persists .
Asset quality metrics remain favorable (NPLs 0.31%, delinquency 0.50%), supporting downside protection despite the rate backdrop .
Funding mix has shifted toward higher-cost time/brokered deposits and wholesale borrowings; watch average borrowed funds cost and volumes for further pressure or relief .
Non-interest income volatility tied to equity securities losses weighed on quarterly fees; continued progress in wealth management helps diversify but is still small in scale .
Dividend maintained at $0.090 per share underscores confidence in capital and liquidity; payout sustainability hinges on stabilizing margins and funding costs .
Medium-term thesis: loan growth (esp. commercial equipment finance) and asset yield tailwinds can rebuild NIM if deposit pricing normalizes; execution on funding strategy is critical .
Trading implication: monitor sequential NIM and cost-of-funds trends and any updates on deposit competition/wholesale funding usage as catalysts for sentiment re-rating .

Citations reference:
- Q2 2023 press release and 8-K exhibit content: [1:*]
- Q1 2023 press release 8-K: [2:*]
- Q4 2022 press release 8-K: [3:*]

FNCB Bancorp, Inc. (FNCB)·Q2 2023 Earnings Summary