First National Community Bancorp director resigns from board
Published: June 27, 2009
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share thisA director of First National Community Bancorp Inc. whose partnership defaulted on nearly $4 million in loans from the bank has resigned from its board, the bank announced in a filing with the U.S. Securities and Exchange Commission on Wednesday.
Michael G. Cestone, president of S.G. Mastriani Construction Co. in Dunmore, was a guarantor for the loans made to W-Cat Inc., a townhouse development firm linked to two former Luzerne County judges who face prison in a kickback scheme.
Mr. Cestone was re-elected to the board of the Dunmore-based bank by shareholders last month despite the defaults, which were revealed in court filings in February.
Mr. Cestone and bank President and Chief Executive Officer J. David Lombardi did not return phone messages Friday.
In its SEC filing, the bank stated: "The resignation was not the result of a disagreement with the Corporation on any matter relating to the Corporation's or Bank's operations, policies or practices."
The terms of the loans to W-Cat have been renegotiated, but the bank placed them on "nonaccrual" status, meaning repayment of the full principal is doubtful.
Mr. Cestone's fellow investors in W-Cat included former Judges Michael T. Conahan and Mark A. Ciavarella Jr. They face 87 months in prison for accepting $2.6 million in kickbacks from individuals connected to a privately owned juvenile detention center that earned $30 million from county contracts.
Mr. Conahan was a member of the bank board when the loans were made but resigned after his arrest in January. Other W-Cat investors included Butler Twp. attorney Robert J. Powell, a former co-owner of the detention center who has agreed to plead guilty in connection with the kickbacks, and his law partner, former county prothonotary Jill A. Moran, who has agreed to cooperate with federal prosecutors in lieu of charges.
W-Cat planned to build more than 80 townhouses in a Wright Twp. development called the Sanctuary, but only a handful were built, and only two were sold. It borrowed the $4.5 million from First National Community Bank in 2005. As of April, $3.9 million was still owed to the bank, according to an SEC report.
Mr. Cestone's S.G. Mastriani Construction Co. was the builder on the project.
Mr. Cestone, 46, has been a member of the bank board since 1989. His father, Michael J. Cestone Jr., 77, remains on the board.
Dunmore landfill/auto parts magnate Louis A. DeNaples and members of his family own about 20 percent of the stock in the publicly traded bank holding company. Mr. DeNaples was chairman of the bank board until February 2008, when he was suspended by the U.S. Office of the Comptroller of the Currency after his arrest on perjury charges.
Mr. DeNaples was accused of lying about alleged relationships with organized crime figures when seeking a state license for his Mount Airy Casino Resort in Monroe Twp. The charges were dropped in April under an agreement in which Mr. DeNaples will transfer ownership of the casino to family members and refrain from involvement in the day-to-day operations of the casino.
The Office of the Comptroller of the Currency has yet to announce a lifting of the suspension.
Also on Thursday, the bank announced in a separate SEC filing that it will amend its financial statement for the first quarter of this year to include an additional $2.1 million charge for loan losses, the bulk of that attributable to the W-Cat default. In preparing its first-quarter statement, the bank erroneously determined the $2.1 million should be allocated to the second quarter of the year, according to the SEC filing.
First National Community Bancorp's stock closed at $8.75 per share Friday, down $1.50.
The bank slashed its quarterly dividend to 2 cents per share for the second quarter of 2009, down from 11 cents per share in the first quarter, citing increased losses on loans. Loan losses for 2009 are projected to be $13.4 million, compared to $8.25 million in 2008 and $6.2 million in 2007.
Contact the writer: djanoski@citizensvoice.com
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