Executive Summary

Q3 2023 EPS was $0.21, up sequentially from $0.14 in Q2 but down year-over-year from $0.28 as higher funding costs and lower non-interest income weighed on results .
Net interest margin (tax-equivalent) improved 10 bps q/q to 2.85% (from 2.75%) as margin pressure appeared to stabilize despite continued deposit competition; NIM remained 58 bps below prior-year levels .
Management emphasized focus on interest rate risk, funding cost control, and non-interest expense, and highlighted an uptick in delinquencies and net charge-offs; strategic merger with PFIS expected by April 1, 2024, subject to approvals .
Dividend maintained at $0.090 per share and Q4 2023 dividend declared (YTD dividends raised 9.1% vs. 2022), supporting capital return while navigating macro headwinds .
Wall Street consensus estimates (S&P Global) were unavailable for FNCB for Q3 2023 due to missing mapping; no beat/miss analysis could be performed.

What Went Well and What Went Wrong

What Went Well

Margin stabilization: NIM (FTE) rose to 2.85% from 2.75% in Q2, with management noting stabilization quarter-over-quarter in a challenging rate environment .
Yield expansion and loan growth: Tax-equivalent yield on earning assets increased to 4.93% (+106 bps y/y) with average loans up 9.5% y/y, driven by strong commercial equipment financing demand .
Wealth management revenue growth: 1st Investment Services revenue increased to $237k in Q3 (+117% y/y), and YTD wealth revenue rose to $720k (+109% y/y) following acquisition of Chiaro Investment Services .
Management tone: “We were pleased to see improvement in our net interest margin quarter over quarter… Management continues to focus on managing interest rate risk, controlling funding costs and non-interest expense” — Gerard A. Champi, President & CEO .

What Went Wrong

Funding cost pressure: Cost of funds rose to 2.66% in Q3 (from 0.59% y/y; +21 bps q/q), with brokered deposits averaging $127.2M and average borrowed funds up to $215.8M at a 4.94% cost, compressing spread and NIM .
Non-interest income headwinds: Q3 non-interest income fell to $1.7M (-21% y/y) driven by net losses on equity securities and lower mortgage sale gains/other fees .
Asset quality deterioration: Non-performing loans increased to 0.43% of total loans (from 0.25% at FY22), delinquency rate rose to 0.72%, and annualized net charge-offs climbed to 0.15% .
Merger-related costs: $537k in M&A expenses recorded in Q3 tied to PFIS merger preparation, inflating non-interest expense .

Financial Results

Metric	Q1 2023	Q2 2023	Q3 2023
Total Interest Income ($USD Millions)	$18.679	$19.936	$21.317
Interest Expense ($USD Millions)	$7.094	$8.307	$9.110
Net Interest Income before Provision ($USD Millions)	$11.585	$11.629	$12.207
(Credit)/Provision for Credit Losses ($USD Millions)	$0.975	$0.799	$(0.270)
Net Interest Income after Provision ($USD Millions)	$10.610	$10.830	$12.477
Non-Interest Income ($USD Millions)	$1.671	$0.948	$1.694
Non-Interest Expense ($USD Millions)	$8.921	$8.102	$9.300
Net Income ($USD Millions)	$2.663	$2.805	$4.162
Diluted EPS ($USD)	$0.14	$0.14	$0.21

Margins & Efficiency	Q1 2023	Q2 2023	Q3 2023
Yield on Earning Assets (FTE) %	4.45%	4.67%	4.93%
Cost of Funds %	2.15%	2.45%	2.66%
Net Interest Margin (FTE) %	2.78%	2.75%	2.85%
Net Interest Spread (FTE) %	2.30%	2.22%	2.27%
Efficiency Ratio %	67.69%	68.11%	66.75%
Annualized ROA %	0.62%	0.63%	0.91%
Annualized ROE %	8.84%	8.89%	13.39%

Balance & Asset Quality	Q1 2023	Q2 2023	Q3 2023
Total Assets ($USD Billions)	$1.809	$1.862	$1.827
Total Deposits ($USD Billions)	$1.463	$1.476	$1.502
Borrowed Funds ($USD Millions)	$196.648	$242.022	$186.733
Non-Performing Loans / Total Loans %	0.23%	0.31%	0.43%
Total Delinquent Loans / Total Loans %	0.40%	0.50%	0.72%
ACL / Total Loans %	1.06%	1.07%	1.01%
Annualized Net Charge-offs / Avg Loans %	0.09%	0.07%	0.15%

Notes:

Margins and yields are reported on a tax-equivalent basis (FTE), a non-GAAP presentation common in bank reporting .

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Dividend per Share	Q4 2023	$0.090 (Q3 2023 dividend)	$0.090 declared for Q4 2023	Maintained
Dividend per Share (YTD)	FY 2023	$0.33 in FY 2022	$0.36 YTD 2023 (+9.1% y/y)	Raised
Strategic Merger Timeline	Expected close	N/A	Expect consummation by April 1, 2024 (subject to approvals)	New event guidance

No quantified revenue/margin/OpEx/tax guidance was provided in press releases; management commentary emphasized margin stabilization, funding cost control, and asset quality monitoring .

Earnings Call Themes & Trends

Earnings call transcript for Q3 2023 was not available. Thematic trends are derived from management commentary in Q1–Q3 press releases.

Topic	Previous Mentions (Q1 2023)	Previous Mentions (Q2 2023)	Current Period (Q3 2023)	Trend
Funding costs & margin	Rapid rise in rates compressing margin/spread; focus on balance sheet and funding cost management	Margin compression continues; competition for deposits; margins stabilizing q/q	NIM improved 10 bps q/q; continued competition for deposits and rising funding costs	Stabilizing but pressured
Deposit mix & brokered deposits	Migration into time deposits; brokered deposits used post industry stress	Significant shift to time deposits; brokered deposits increased; use BTFP/FHLB	Time deposits up; brokered deposits $123.1M at Q3; continued liquidity management	Mix shifting to higher-cost
Asset quality	NPLs improved y/y; delinquency down	NPLs up modestly; delinquency slightly higher	NPLs up to 0.43%; delinquency 0.72%; watch list on C&I/CRE	Deteriorating
Non-interest income	Equity securities losses; lower merchant/other	Equity securities losses; lower mortgage gains	Continued equity losses; wealth mgmt growth offsets partially	Mixed; equity drag
Strategy & M&A	None (pre-CECL adoption noted)	None	Announced strategic combination with PFIS (close targeted by 4/1/24)	Transformational pending

Management Commentary

“We were pleased to see improvement in our net interest margin quarter over quarter, despite a continued challenging rate environment and strong competition for deposits in our market area. Management continues to focus on managing interest rate risk, controlling funding costs and non-interest expense… we are beginning to see an uptick in delinquencies and net charge-offs.” — Gerard A. Champi, President & CEO .
Q2 tone: “Earnings continued to be impacted by margin compression… On a positive note, we are beginning to see our margins stabilize, while our asset quality and liquidity positions remain strong.” — Gerard A. Champi .
Merger message: The PFIS/FNCB strategic combination aims to enhance presence in PA/NY/NJ, bring “best of both banks” for products/technology/processes, with leadership succession planned post-close .

Q&A Highlights

No Q3 2023 earnings call transcript was found; Q&A themes and any guidance clarifications were not available.

Estimates Context

Wall Street consensus (S&P Global) for Q3 2023 EPS and revenue was unavailable due to missing SPGI/CIQ mapping for FNCB, so beat/miss analysis versus consensus could not be performed. This limits immediate estimate-revision implications.

Key Takeaways for Investors

Sequential EPS improvement and NIM stabilization: EPS rose to $0.21 (from $0.14), and NIM ticked up to 2.85% (+10 bps q/q), suggesting early signs of stabilization despite elevated funding costs .
Funding cost headwinds remain: Cost of funds reached 2.66% (from 2.45% in Q2), with higher-cost brokered deposits and borrowed funds contributing to spread pressure; depositors remain rate-sensitive .
Deposit mix shift increases interest sensitivity: Time deposits grew to $337.2M, including $123.1M brokered, while non-maturity deposits fell $97.6M YTD, raising liability costs in the near term .
Asset quality needs close monitoring: NPL ratio rose to 0.43% and delinquency to 0.72%, concentrated in C&I and CRE, and net charge-offs increased to 0.15% of average loans .
Revenue levers mixed: Total interest income continued to benefit from higher asset yields and loan volumes; non-interest income faced equity security volatility, partly offset by stronger wealth management revenue .
Merger is a medium-term catalyst: Strategic combination with PFIS (target close by April 1, 2024) could drive scale, product/technology enhancements, and potential synergies, but entails integration and execution risks .
Capital return intact: Q4 2023 dividend declared at $0.090; YTD dividends up 9.1% vs. 2022, reflecting commitment to shareholder returns amid macro uncertainty .

Actionable: Near-term trading may key off margin trajectory and asset quality indicators; monitor deposit repricing pace, brokered/CD utilization, and any regulatory/approval milestones for the PFIS merger. Medium-term thesis hinges on successful integration and synergy capture, with potential improvement in funding mix and efficiency post-close .

FNCB Bancorp, Inc. (FNCB)·Q3 2023 Earnings Summary