Note 1. Basis of Presentation/Subsequent Event The consolidated financial statements of FNCB are comprised of the accounts of FNCB Bancorp, Inc., and its wholly owned subsidiary, FNCB Bank (the Bank), as well as the Banks wholly owned subsidiaries (collectively, FNCB). The accounting and reporting policies of FNCB conform to accounting principles generally accepted in the United States of America (GAAP) for interim financial information and with the instructions to Form 10 -Q and Article 10 - 01 of Regulation S- X. Accordingly, they do not include all the information and accompanying notes required by GAAP for complete financial statements. In the opinion of management, all adjustments necessary for a fair presentation of the financial position and the results of operations for the periods presented have been included in the consolidated financial statements. All intercompany balances and transactions have been eliminated in consolidation. Prior period amounts have been reclassified when necessary to conform to the current periods presentation. Such reclassifications did not have an impact on the operating results or financial position of FNCB. The operating results and financial position of FNCB for the three months ended March 31, 2020 , may not be indicative of future results of operations and financial position. The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ significantly from those estimates. Material estimates that are particularly susceptible to change in the near term are the allowance for loan and lease losses (ALLL), securities valuation and impairment evaluation, the valuation of other real estate owned (OREO), and income taxes. These financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in FNCBs audited financial statements, included in the Annual Report filed on Form 10 -K as of and for the year ended December 31, 2019 . Risks and Uncertainties Related to COVID- 19 In March 2020, the outbreak of the novel Coronavirus Disease 2019 ("COVID- 19" ) was recognized as a pandemic by the World Health Organization. The spread of COVID- 19 has created a global public health crisis that has resulted in unprecedented uncertainty, volatility and disruption in financial markets and in governmental, commercial and consumer activity in the United States and globally, including the markets that FNCB serves. Governmental authorities have responded to the pandemic by mandating the closure of locations of non-essential businesses and requiring individuals to observe social distancing and "stay-at-home" restrictions. These governmental restrictions, coupled with fear of contracting the virus, have resulted in a rapid decline in commercial and consumer activity, loss of revenues by businesses, a severe spike in unemployment, material decreases in oil and gas prices and in business valuations, disrupted global supply chains and market volatility. The federal government has taken several actions designed to mitigate the impact of the economic disruption. Specifically, on March 27, 2020, the Coronavirus Aid, Relief, and Economic Security ("CARES") Act, a $2.0 trillion legislative package, was signed into law. The CARES Act contains substantial tax and spending provisions including direct financial aid to American families, extensive emergency funding for hospitals and medical providers, and economic stimulus to significant impacted industry sectors. Management expects the general impact of COVID- 19, as well as certain provisions of the CARES Act and other recent legislative and regulatory relief efforts, to have a material impact on FNCB's operations. Because the impact is contingent upon the duration and severity of the economic downturn, management cannot determine or estimate the magnitude of the impact at this time. However, FNCB is disclosing potentially material items it is currently aware of. Business Continuity, Processes and Controls As a financial institution, FNCB is considered essential and has remained open for business. FNCB has invoked its pandemic preparedness plan. To address the financial needs of our customers in a safe and consistent manner, FNCB Bank offices remain open for regular business via drive-thru facilities, automated teller machines, Customer Care center, remote deposit capture and online and mobile banking applications. For customers needing in-person service, FNCB has been offering a by-appointment option while adhering to social distancing mandates. FNCB has also provided the technology for the majority of our operational staff can work remotely in a secure environment. FNCB does not currently face any material resource constraints through the implementation of its pandemic preparedness plan and does not anticipate incurring material cost related to its implementation. Additionally, FNCB has not identified any material operational or internal control challenges or risks, nor does it anticipate any significant challenges to its ability to maintain its systems and controls, related to operational changes resulting from implementation of the pandemic preparedness plan. Financial Position and Results of Operations Bank regulators have issued guidance and are encouraging banks to work with customers affected by COVID- 19. Accordingly, the FNCB is actively working with borrowers affected by COVID- 19 and has rolled out a payment deferral program providing for either a three -month interest-only period or full payment deferral for three months. While interest and fees will still accrue to income, under normal GAAP accounting, should eventual credit losses on these deferred payments emerge, interest income and fees accrued would need to be reversed. As a result, interest income in future periods could be negatively impacted. While FNCB is unable to determine the effective of such an impact on its financial condition or results of operations at this time, it recognizes sustained economic impact may affect its borrowers ability to repay in future periods. At March 31, 2020, FNCB and FNCB Bank was considered well capitalized with capital ratios that were in excess of regulatory requirements. However, an extended economic recession resulting from the COVID- 19 pandemic could adversely impact FNCB and FNCB Bank's capital position and regulatory capital ratios due to a potential increase in credit losses. Lending Operations and Credit Risk As previously mentioned, FNCB is working with its lending customers that are facing unemployment, temporary furloughs and closures, by offering a payment deferral program. FNCB has provided either a three -month interest-only period or full payment deferral for three months depending on the specific need of the borrower. As of April 30, 2020, FNCB assisted 771 customers under our payment deferral program, with the total principal balance of loans modified of $153.7 million. In accordance with interagency guidance issued in March 2020, these short-term deferrals are not considered troubled debt restructurings. The CARES Act includes a Paycheck Protection Program ("PPP"), a program administered by the Small Business Administration ("SBA") designed to aid small- and medium-sized businesses through federally guaranteed loans distributed through banks. These loans are intended to guarantee eight weeks of payroll and other costs to help those businesses remain viable and allow their workers to pay their bills. As an SBA Lender, FNCB Bank is actively participating in PPP loans assisting our small business community in securing this important funding. As of April 30, 2020, FNCB has approved and/or closed with the SBA 482 PPP loans representing $93.6 million in funding. It is FNCB's understanding that loans funded through the PPP are fully guaranteed by the United States government. Should those circumstances change, FNCB could be required to increase its allowance for loan and lease losses related to these loans resulting in an increase in the provision for loan and lease losses. FNCB is prepared to continue to offer short-term assistance in accordance with regulatory guidelines. As the fallout of the COVID- 19 pandemic ripple through the national, regional and local economies, management continues to identify and monitor potential weaknesses in the loan portfolio. Management has identified and is monitoring exposures to borrowers and industries that may be impacted more immediately and acutely than others. Additionally, management has proactively reached out to specific borrowers to provide guidance and assistance as appropriate. On a portfolio level, management continues to monitor aggregate exposures to highly sensitive segments such as hotels and hospitality for changes in asset quality and payment performance, and liquidity levels. Management monitors unfunded commitments such as lines of credit and overdraft protection to determine liquidity and funding issues that may arise with our customers. Should economic conditions worsen, FNCB could experience further increases in its required allowance for loan and lease losses and record additional provisions for loan and lease losses. It is possible that FNCBs asset quality metrics could be materially and adversely impacted in future periods if the effects of COVID- 19 are prolonged.