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U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

(Mark One)

Commission File No.____________

        Indicate by check whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

         Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

YES X       NO   

Indicate the number of shares outstanding of each of the issuer’s classes of common stock as of the latest practicable date:

FIRST NATIONAL COMMUNITY BANCORP, INC.

INDEX

(ii)

FIRST NATIONAL COMMUNITY BANCORP, INC.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Dollars in thousands)

Note: The balance sheet at December 31, 2002 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements.

See notes to financial statements

(1)

FIRST NATIONAL COMMUNITY BANCORP, INC.
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(Dollars in thousands, except per share amounts)

See notes to financial statements

(2)

FIRST NATIONAL COMMUNITY BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 2003 AND 2002
(UNAUDITED)

(Continued)

(3)

FIRST NATIONAL COMMUNITY BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOW (CONTINUED)
SIX MONTHS ENDED JUNE 30, 2003 AND 2002
(UNAUDITED)

See notes to financial statements

(4)

FIRST NATIONAL COMMUNITY BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN
STOCKHOLDERS’ EQUITY
For The Six Months Ended June 30, 2003
(In thousands, except share data)
(UNAUDITED)

See notes to financial statements

(5)

FIRST NATIONAL COMMUNITY BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

    (1)        The accounting and financial reporting policies of First National Community Bancorp, Inc. and its subsidiary conform to generally accepted accounting principles and to general practice within the banking industry. The consolidated statements include the accounts of First National Community Bancorp, Inc. and its wholly owned subsidiary, First National Community Bank (Bank) including its subsidiary, FNCB Realty, Inc. (collectively, Company). All material intercompany accounts and transactions have been eliminated in consolidation. The accompanying interim financial statements are unaudited. In management’s opinion, the consolidated financial statements reflect a fair presentation of the consolidated financial position of First National Community Bancorp, Inc. and subsidiary, and the results of its operations and its cash flows for the interim periods presented, in conformity with generally accepted accounting principles.

        These interim financial statements should be read in conjunction with the audited financial statements and footnote disclosures in the Bank’s Annual Report to Shareholders for the fiscal year ended December 31, 2002.

     (2)        Basic earnings per share have been computed by dividing net income (the numerator) by the weighted average number of common shares (the denominator) for the period. Such shares amounted to 5,227,790 and 5,125,512 for the periods ending June 30, 2003 and 2002, respectively.

        Diluted earnings per share have been computed by dividing net income (the numerator) by the weighted average number of common shares and options outstanding (the denominator) for the period. Such shares amounted to 5,475,711 and 5,299,832 for the periods ending June 30, 2003 and 2002, respectively.

    (3)        During the first quarter of calendar 2003, the company adopted the fair value recognition provisions of FASB Statement No. 123, Accounting for Stock-Based Compensation, for stock-based employee compensation, effective as of January 1, 2003. Under the prospective method of adoption selected by the company, stock-based compensation cost will be recognized using the fair value method for all awards granted, modified or settled on or after that effective date. For the quarters ended June 30, 2003 and 2002 there was no activity in stock-based compensation, accordingly, the adoption of this method had no affect on net income as reported or pro forma net income.

(6)

The consolidated financial review of First National Community Bancorp, Inc. (the “company”) provides a comparison of the performance of the company for the periods ended June 30, 2003 and 2002. The financial information presented should be reviewed in conjunction with the consolidated financial statements and accompanying notes appearing elsewhere in this report.

Background

        First National Community Bancorp, Inc. (the company) is a Pennsylvania Corporation, incorporated in 1997 and is registered as a financial holding company under the Bank Holding Company Act of 1956, as amended. The company became an active bank holding company on July 1, 1998 when it assumed ownership of First National Community Bank (the bank). On November 2, 2000, the Federal Reserve Bank of Philadelphia approved the company’s application to change its status to a financial holding company as a complement to the company’s strategic objective. The bank is a wholly-owned subsidiary of the company.

        The company’s primary activity consists of owning and operating the bank, which provides the customary retail and commercial banking services to individuals and businesses. The bank provides practically all of the company’s earnings as a result of its banking services. As of June 30, 2003, the company had 14 full-service branch banking offices in its principal market area in Lackawanna and Luzerne Counties, Pennsylvania. At June 30, 2003, the company had 219 full-time equivalent employees.

        The bank was established as a national banking association in 1910 as “The First National Bank of Dunmore.” Based upon shareholder approval received at a Special Shareholders’ Meeting held October 27, 1987, the bank changed its name to “First National Community Bank” effective March 1, 1988. The bank’s operations are conducted from offices located in Lackawanna and Luzerne Counties, Pennsylvania:

(7)

        The bank provides the usual commercial banking services to individuals and businesses, including a wide variety of loan and deposit instruments. As a result of the bank’s partnership with INVEST, our customers are able to access alternative products such as mutual funds, bonds, equities and annuities directly from our INVEST representatives.

        During 1996, FNCB Realty Inc. was formed as a wholly owned subsidiary of the Bank to manage, operate and liquidate properties acquired through foreclosure.

Summary:

        Net income for the six months ended June 30, 2003 amounted to $4,541,000, an increase of $519,000 or 13% compared to the same period of the previous year. This increase can be attributed to the $438,000 improvement in net interest income and the $596,000 increase in other income. Non-interest expenses increased $386,000, or 6%, over the same period of last year due primarily to an increase in Salaries & Benefits of $189,000.

        Net income for the quarter ended June 30, 2003 amounted to $2,306,000, an increase of $292,000, or 15% compared to the same period of the previous year. This increase can be attributed to the $521,000 improvement in other income, which includes a $425,000 increase in gains from the sale of loans and investments. Non-interest expenses increased $215,000, or 6%, over the same period of last year due primarily to an increase in other expenses of $134,000.

RESULTS OF OPERATIONS

Net Interest Income:

        The Company’s primary source of revenue is net interest income which totaled $11,280,000 and $10,842,000 (before the provision for credit losses) during the first six months of 2003 and 2002, respectively. Net interest income for the quarters ended June 30, 2003 and June 30, 2002 amounted to $5,697,000 and $5,618,000, respectively. Year to date net interest margins (tax equivalent) decreased slightly to 3.41% for 2003 compared to 3.49% in 2002 comprised of a seventy six basis point decrease in the yield earned on earning assets and a seventy four basis point decrease in the cost of interest-bearing liabilities. Excluding investment leveraging transactions, the year-to-date margin decreased seven basis points when compared to the same six-month period of last year.

        Earning assets increased $38 million to $733 million during the first six months of 2003 and now total 94.2% of total assets, a slight decrease from the year-end level of 94.9%.

(8)

Yield/Cost Analysis

        The following tables set forth certain information relating to the Company’s Statement of Financial Condition and reflect the weighted average yield on assets and weighted average costs of liabilities for the periods indicated. Such yields and costs are derived by dividing the annualized income or expense by the weighted average balance of assets or liabilities, respectively, for the periods shown:

(1)     Yields on tax-exempt loans and investment securities have been computed on a tax equivalent basis.

(9)

(1)     Yields on tax-exempt loans and investment securities have been computed on a tax equivalent basis.

(10)

Rate Volume Analysis

        The table below sets forth certain information regarding the changes in the components of net interest income for the periods indicated. For each category of interest earning asset and interest bearing liability, information is provided on changes attributed to: (1) changes in rate (change in rate multiplied by current volume); (2) changes in volume (change in volume multiplied by old rate); (3) the total. The net change attributable to the combined impact of volume and rate has been allocated proportionately to the change due to volume and the change due to rate.

(11)

Other Income and Expenses:

        Other income in the first six months of 2003 increased $596,000 in comparison to the same period of 2002. Service charges and fees increased $118,000, or 10%, over the prior period. Income from service charges increased $82,000, or 13%, in comparison to the same period of last year while other fee income increased $36,000, or 7%. New products and a larger deposit base contributed to the increases. Net gains from the sale of assets increased $478,000 from last year.

        On a quarterly basis, other income for the second quarter of 2003 increased $521,000 in comparison to the same period of 2002. Service charges and fees increased $96,000, or 17%, over the prior period. Income from service charges increased $34,000, or 10%, in comparison to the same period of last year while other fee income increased $62,000, or 29%. Net gains from the sale of assets increased $425,000 over the second quarter of 2002.

        Other expenses increased $386,000 or 6% for the period ended June 30, 2003 compared to the same period of the previous year. Salaries and Benefits costs added $189,000, or 6% in comparison to the first six months of 2002. Occupancy and equipment costs rose 4%, advertising costs rose 9%, data processing costs rose 7% and other operating expenses increased $97,000, or 6%.

        Other expenses for the second quarter of 2003 increased $215,000 in comparison to the same period of 2002. Salaries and benefits costs added $45,000, or 3% in comparison to the second quarter of 2002. Advertising costs rose 13%, data processing costs rose 9% and other operating expenses increased 19% due primarily to increases in postage of $23,000 and state taxes paid of $42,000.

Other Comprehensive Income:

        The Company’s other comprehensive income includes unrealized holding gains (losses) on securities which it has classified as available-for-sale in accordance with FASB 115, “Accounting for Certain Investments in Debt and Equity Securities.”

Provision for Income Taxes:

        The provision for income taxes is calculated based on annualized taxable income. The provision for income taxes differs from the amount of income tax determined applying the applicable U.S. statutory federal income tax rate to pre-tax income from continuing operations as a result of the following differences:

(12)

Securities:

        Carrying amounts and approximate fair value of investment securities are summarized as follows:

        The following summarizes the amortized cost, approximate fair value, gross unrealized holding gains, and gross unrealized holding losses at June 30, 2003 of the Company’s Investment Securities classified as available-for-sale:

(13)

        The following summarizes the amortized cost, approximate fair value, gross unrealized holding gains, and gross unrealized holding losses at June 30, 2003 of the Company’s Investment Securities classified as held-to-maturity:

        The following table shows the amortized cost and approximate fair value of the company’s debt securities at June 30, 2003 using contractual maturities. Expected maturities will differ from contractual maturity because issuers may have the right to call or prepay obligations with or without call or prepayment penalties.

        Gross proceeds from the sale of investment securities for the periods ended June 30, 2003 and 2002 were $30,219,548 and $33,974,698 respectively with the gross realized gains being $796,768 and $342,664 respectively, and gross realized losses being $142,115 and $11,097, respectively.

        At June 30, 2003 and 2002, investment securities with a carrying amount of $60,292,786 and $95,716,853 respectively, were pledged as collateral to secure public deposits and for other purposes.

(14)

Loans:

        The following table sets forth detailed information concerning the composition of the company’s loan portfolio as of the dates specified:

        The following table sets forth certain information with respect to the company’s allowance for loan losses and charge-offs:

(15)

        The following table presents information about the company’s non-performing assets for the periods indicated: