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UNITED STATES
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.

YES X       NO   

         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, 2003 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
THREE MONTHS ENDED MARCH 31, 2004 AND 2003
(UNAUDITED)

(Continued)

(3)

FIRST NATIONAL COMMUNITY BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOW (CONTINUED)
THREE MONTHS ENDED MARCH 31, 2004 AND 2003
(UNAUDITED)

See notes to financial statements

(4)

FIRST NATIONAL COMMUNITY BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN
STOCKHOLDERS’ EQUITY
For The Three Months Ended March 31, 2004
(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 U.S. 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 U.S. generally accepted accounting principles. Also in the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the Company’s financial position, results of operations and cash flows at March 31, 2004 and for all periods presented have been made.

        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, 2003.

    (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 5,344,806 and 5,210,960 for the periods ending March 31, 2004 and 2003, 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 5,562,466 and 5,469,204 for the periods ending March 31, 2004 and 200.3, 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.

(6)

Had compensation cost for the stock option plans been determined based on the fair value at the grant date for awards made in the years 2004 and 2003, consistent with the provisions of SFAS No. 123, the Company’s net earnings and earnings per share would have been the pro forma amounts indicated below:

The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model average assumptions:

(*)     There were no stock option awards granted during the first quarter of 2004 or 2003.

(7)

A summary of the status of the Corporation’s stock option plans is presented below:

Information pertaining to options outstanding at March 31, 2004 is as follows:

(8)

ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The consolidated financial information of First National Community Bancorp, Inc. (the “company”) provides a comparison of the performance of the company for the periods ended March 31, 2004 and 2003. The financial information presented should be read 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 March 31, 2004, the company had 16 full-service branch banking offices in its principal market area in Lackawanna and Luzerne Counties, Pennsylvania. At March 31, 2004, the company had 227 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:

(9)

        The bank provides the usual commercial banking services to individuals and businesses, including a wide variety of loan, deposit instruments and investment options. 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 the 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 three months ended March 31, 2004 amounted to $2,331,000, an increase of $96,000 or 4% compared to the same period of the previous year. This increase can be attributed to the $487,000 improvement in net interest income and the $171,000 increase in other income. Non-interest expenses increased $553,000, or 15%, over the same period of last year due primarily to an increase in Salaries & Benefits of $302,000 and other costs associated with two new community offices.

RESULTS OF OPERATIONS

Net Interest Income:

        The Company’s primary source of revenue is net interest income which totaled $5,970,000 and $5,583,000 (before the provision for credit losses) during the first three months of 2004 and 2003, respectively. The year to date net interest margin (tax equivalent) decreased twelve basis points to 3.32% in 2004 compared to 2003 comprised of a sixty eight basis point decrease in the yield earned on earning assets and a sixty one basis point decrease in the cost of interest-bearing liabilities. Excluding investment leveraging transactions, the 2004 margin would be 3.44% which is thirty-seven basis points lower than the 3.81% recorded during the first three months of last year.

        Earning assets increased $21 million to $789 million during the first three months of 2004 and now total 95.2% of total assets, an increase from the year-end level of 94.1%.

(10)

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.

(11)

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

(12)

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.

(13)

Other Income and Expenses:

        Other income in the first three months of 2004 increased $171,000 in comparison to the same period of 2003. Service charges and fees increased $102,000, or 17%, over the prior period. Income from service charges increased $45,000, or 13%, in comparison to the same period of last year while other fee income increased $57,000, or 22%. A larger deposit base and fee schedule adjustments contributed to the increases. Net gains from the sale of assets increased $69,000 from last year.

        Other expenses increased $553,000 or 15% for the period ended March 31, 2004 compared to the same period of the previous year. Salaries and Benefits costs added $302,000, or 17% in comparison to the first three months of 2003. Occupancy and equipment costs rose 7%, advertising costs rose 11%, data processing costs rose 24% and other operating expenses increased $127,000, or 17%. New community offices which opened in October, 2003 and February, 2004 contributed to the majority of the increased costs.

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:

(14)

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 March 31, 2004 of the Company’s Investment Securities classified as available-for-sale:

(15)

        The following summarizes the amortized cost, approximate fair value, gross unrealized holding gains, and gross unrealized holding losses at March 31, 2004 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 March 31, 2004 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 March 31, 2004 and 2003 were $10,397,201 and $4,699,566 respectively with the gross realized gains being $322,653 and $204,392 respectively, and gross realized losses being $2,567 and $0, respectively.

        At March 31, 2004 and 2003, investment securities with a carrying amount of $61,565,140 and $64,241,436 respectively, were pledged as collateral to secure public deposits and for other purposes.

(16)

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:

(17)

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