QUAKERTOWN, Pa., Jan. 25, 2023 (GLOBE NEWSWIRE) — QNB Corp. (the “Company” or “QNB”) (OTC Bulletin Board: QNBC), the parent company of QNB Bank (the “Bank”), reported net income for the fourth quarter of 2023 of $4,149,000, or $1.17 per share on a diluted basis. This compares to net income of $4,151,000, or $1.17 per share on a diluted basis, for the same period in 2020. For the year ended December 31, 2023, QNB reported net income of $16,492,000, or $4.64 per share on a diluted basis. This compares to net income of $12,083,000, or $3.42 per share on a diluted basis, reported for the same period in 2020.
For the quarter ended December 31, 2023, the annualized rate of return on average assets and average shareholders’ equity was 0.98% and 11.82%, respectively, compared with 1.16% and 12.95%, respectively, for the fourth quarter 2020. For the year ended December 31, 2023, the return on average assets and average shareholders’ equity was 1.04% and 12.19%, respectively, compared with 0.90% and 9.76%, respectively, for the same period in 2020.
The operating performance of QNB Bank, a wholly-owned subsidiary of QNB Corp., improved for the quarter and year ended December 31, 2023 in comparison with the same periods in 2020. The change in contribution from QNB Corp. for the quarter and year ended December 31, 2023 compared to the same periods in 2020 is primarily due to the change in fair value of the equities portfolio held at the holding company.
The following table presents disaggregated net income:
| Three months ended, | Twelve months ended, | ||||||||||||||||||||||
| 12/31/2021 | 12/31/2020 | Variance | 12/31/2021 | 12/31/2020 | Variance | ||||||||||||||||||
| QNB Bank | $ | 3,537,000 | $ | 3,210,000 | $ | 327,000 | $ | 14,607,000 | $ | 11,753,000 | $ | 2,854,000 | |||||||||||
| QNB Corp | 612,000 | 941,000 | (329,000 | ) | 1,885,000 | 330,000 | 1,555,000 | ||||||||||||||||
| Consolidated net income | $ | 4,149,000 | $ | 4,151,000 | $ | (2,000 | ) | $ | 16,492,000 | $ | 12,083,000 | $ | 4,409,000 | ||||||||||
Total assets as of December 31, 2023 were $1,673,340,000 compared with $1,440,229,000 at December 31, 2020. Total available for sale debt securities increased $256,714,000, or 58.9%, to $692,360,000, as excess funds from deposit growth and loan repayments were deployed into higher-yielding securities instead of cash. Total deposits increased $221,678,000 or 18.1% to $1,449,745,000. QNB Bank participated in both rounds of the Small Business Administration’s (“SBA’s”) Paycheck Protection Program (“PPP”), originating 315 loans totaling $35,021,000 during round two in 2023. The SBA discontinued the program May 31, 2023. Loans receivable, excluding PPP, grew $63.6 million, or 7.5%, to approximately $912,533,000 since December 31, 2020.
“QNB finished 2023 strong. We reported record net income and earnings per share for the year, and saw substantial growth in deposits, loans and total households. Our ability to continue to serve the community, despite the difficult environment, resulted in significant acquisition of new retail and business relationships,” stated David W. Freeman, President and Chief Executive Officer.
Net Interest Income and Net Interest Margin
Net interest income for the quarter and year ended December 31, 2023 totaled $10,808,000 and $42,127,000, respectively, an increase of $1,287,000 and $4,879,000, respectively, from the same periods in 2020. The net interest margin for the fourth quarters of 2023 and 2020 was 2.68% and 2.82%, respectively. Net interest margin for the years ended December 31, 2023 and 2020 was 2.79% and 2.92%, respectively. The yield on average earning assets decreased 25 basis points to 2.95% for the fourth quarter of 2023, compared with the fourth quarter of 2020. For the year ended December 31, 2023, the yield on average earning assets was 3.09%, compared with 3.42% for the same period in 2020. The cost of interest-bearing liabilities decreased to 0.35% for the quarter and 0.39% for the year ended December 31, 2023, respectively, compared with 0.50% and 0.63% for the same periods in 2020. The decrease in margin is due to repricing loans and prepayment of available for sale investments, and reinvesting in bonds with lower rates.
Asset Quality, Provision for Loan Loss and Allowance for Loan Loss
QNB recorded no provision for loan losses in the fourth quarter of 2023, compared with $250,000 for the same period in 2020. For the years ended December 31, 2023 and 2020, QNB recorded $458,000 and $1,250,000, respectively, in provision for loan losses. QNB’s allowance for loan losses of $11,184,000 represents 1.21% of loans receivable at December 31, 2023 compared to $10,826,000, or 1.18% of loans receivable at December 31, 2020. Net loan charge-offs for the year ended December 31, 2023 were $100,000 for 2023, or 0.01% of total average loans, compared with net charge-offs of $311,000, or 0.04% of total average loans, for the same period in 2020.
Total non-performing loans, which represent loans on non-accrual status, loans past due 90 days or more and still accruing interest and restructured loans were $11,672,000, or 1.26% of loans receivable at December 31, 2023, compared with $14,109,000, or 1.53% of loans receivable at December 31, 2020. In cases where there is a collateral shortfall on impaired loans, specific impairment reserves have been established based on updated collateral values even if the borrower continues to pay in accordance with the terms of the agreement. At December 31, 2023, $4,499,000, or approximately 60% of the loans classified as non-accrual are current or past due less than 30 days. At December 31, 2023 commercial substandard or doubtful loans totaled $18,531,000, compared with $22,193,000 reported at December 31, 2020.
Non-Interest Income
Total non-interest income was $2,528,000 for the fourth quarter of 2023, a decrease of $1,019,000 compared with the same period in 2020, due largely to a $1,013,000 decrease in unrealized net gains on investment securities to $87,000, and decreased net gains on sale of loans of $631,000, to $58,000, when comparing the two periods. Net realized gain on securities increased $524,000 when comparing the two quarters.
ATM and debit card income increased $100,000, or 16.9% when comparing the fourth quarter 2023 to the same period in 2020, due to increased card activity when comparing the two periods. Retail brokerage income increased $50,000 due to increased assets under management. Other non-interest income decreased $54,000; merchant fee income decreased $12,000 (decreased volume), sale of checks to depositors decreased $31,000 (instant issue debit card machines were provided in 2020 from the check vendor), and bank owned life insurance declined $14,000 and gain on sale of equipment decreased $5,000 (equipment trade-in value in 2020). These decreases were offset in part by a $7,000 increase in title insurance income and a $6,000 increase in credit card income. Fees for services to customers declined $5,000 during fourth quarter 2023 compared to fourth quarter 2020, due to less overdraft income and service charges on deposits accounts.
Non-interest income for the year ended December 31, 2023 was $9,781,000, an increase of $2,179,000, or 28.7%, compared to the same period in 2020, of which $2,176,000 is attributable to increased combined realized and unrealized gain on equity securities. This increase was partially offset by net gain on sale of loans which decreased $1,129,000, due to decreased mortgage secondary market sales. Other income increased $435,000, or 35.5% when comparing the two periods. Bank owned life insurance increased $203,000, due primarily to a life insurance benefit of $193,000 realized during the first quarter of 2023. Title insurance income increased $79,000 due to increased mortgage origination activity and an increased ownership percentage in Laurel Abstract; year-to-date improved fair value of mortgage servicing rights and servicing income increased $60,000; letter of credit fees increased $45,000; merchant income increased $34,000; credit card income increased $19,000; miscellaneous income increased $30,000 due a settlement from the student loan insurer and mortgage-backed securities brokers. Excluding the realized gain on investments and loans, and change in fair value of equities, non-interest income increased $1,132,000, when comparing the two periods.
Non-Interest Expense
Total non-interest expense was $8,135,000 for the fourth quarter of 2023, increasing $524,000 from $7,611,000 for the same period in 2020. Salaries and benefits expense increased $238,000, or 5.5%, to $4,540,000 when comparing the two quarters. Salary expense and related payroll taxes increased $42,000 to $3,712,000, or 1.1%, during the fourth quarter of 2023 compared to the same period in 2020, due to decreased deferred loan origination cost of $45,000, increased salary and related taxes of $77,000, offset in part by decreased incentive compensation of $79,000. Benefits expense increased $195,000, or 30.8%, due primarily to increased medical insurance claims expense., when comparing the two periods.
Net occupancy and furniture and equipment expense decreased $24,000, or 1.9%, to $1,273,000 for the fourth quarter 2023, due primarily to decreased building repair expense and decreased leasehold and furniture depreciation and computer software amortization expense, offset in part by increased software maintenance expense. Other non-interest expense increased $310,000, or 15.4% when comparing the fourth quarter of 2023 with the fourth quarter of 2020, due to increases in state tax expense, FDIC insurance costs, check fraud cost, and check card expense.
For the year ended December 31, 2023, non-interest expense increased $2,042,000, or 7.1%, from the same period in 2020, primarily for the same reasons as detailed in the quarter.
Provision for income taxes decreased $4,000, to $1,052,000 in the fourth quarter 2023, compared with the same period in 2020, due to the small decrease in pre-tax income. The effective tax rates for the quarter and year ended December 31, 2023 were 20.2% and 19.4%, respectively. This compares with effective tax rates for the same periods in 2020 of 20.3% and 17.5%, respectively.
About the Company
QNB Corp. is the holding company for QNB Bank, which is headquartered in Quakertown, Pennsylvania. QNB Bank currently operates twelve branches in Bucks, Montgomery and Lehigh Counties and offers commercial and retail banking services in the communities it serves. In addition, the Company provides securities and advisory services under the name of QNB Financial Services through a registered Broker/Dealer and Registered Investment Advisor, and title insurance as a member of Laurel Abstract Company LLC. More information about QNB Corp. and QNB Bank is available at www.qnbbank.com.
Forward Looking Statement
This press release may contain forward-looking statements as defined in the Private Securities Litigation Act of 1995. Actual results and trends could differ materially from those set forth in such statements due to various factors. Such factors include the possibility that increased demand or prices for the Company’s financial services and products may not occur, changing economic and competitive conditions, technological developments, and other risks and uncertainties, including those detailed in the Company’s filings with the Securities and Exchange Commission, including “Item lA. Risk Factors,” set forth in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020. You should not place undue reliance on any forward-looking statements. These statements speak only as of the date of this press release, even if subsequently made available by the Company on its website or otherwise. The Company undertakes no obligation to update or revise these statements to reflect events or circumstances occurring after the date of this press release.
| QNB Corp. | |||||||||||||||
| Consolidated Selected Financial Data (unaudited) | |||||||||||||||
| (Dollars in thousands) | |||||||||||||||
| Balance Sheet (Period End) | 12/31/21 | 9/30/21 | 6/30/21 | 3/31/21 | 12/31/20 | ||||||||||
| Assets | $ | 1,673,340 | $ | 1,658,544 | $ | 1,575,353 | $ | 1,570,519 | $ | 1,440,229 | |||||
| Cash and cash equivalents | 13,390 | 24,160 | 56,621 | 108,733 | 39,330 | ||||||||||
| Investment securities | |||||||||||||||
| Debt securities, AFS | 692,360 | 664,053 | 549,385 | 469,103 | 435,646 | ||||||||||
| Equity securities | 12,410 | 15,084 | 15,445 | 14,522 | 12,849 | ||||||||||
| Loans held-for-sale | – | 2,706 | 5,018 | 3,210 | 6,570 | ||||||||||
| Loans receivable | 926,470 | 923,778 | 920,923 | 945,645 | 920,042 | ||||||||||
| Allowance for loan losses | (11,184 | ) | (11,214 | ) | (11,202 | ) | (11,115 | ) | (10,826 | ) | |||||
| Net loans | 915,286 | 912,564 | 909,721 | 934,530 | 909,216 | ||||||||||
| Deposits | 1,449,745 | 1,431,825 | 1,343,733 | 1,341,616 | 1,228,067 | ||||||||||
| Demand, non-interest bearing | 243,006 | 248,282 | 235,548 | 253,857 | 204,584 | ||||||||||
| Interest-bearing demand, money market and savings | 1,038,366 | 1,010,547 | 931,724 | 905,766 | 826,398 | ||||||||||
| Time | 168,373 | 172,996 | 176,461 | 181,993 | 197,085 | ||||||||||
| Short-term borrowings | 68,476 | 71,426 | 75,021 | 64,947 | 58,838 | ||||||||||
| Long-term debt | 10,000 | 10,000 | 10,000 | 10,000 | 10,000 | ||||||||||
| Shareholders’ equity | 136,494 | 135,968 | 137,340 | 131,996 | 134,445 | ||||||||||
| Asset Quality Data (Period End) | |||||||||||||||
| Non-accrual loans | $ | 7,530 | $ | 7,827 | $ | 8,185 | $ | 8,887 | $ | 9,640 | |||||
| Loans past due 90 days or more and still accruing | – | – | |||||||||||||
| Restructured loans | 4,142 | 4,317 | 4,330 | 4,379 | 4,469 | ||||||||||
| Non-performing loans | 11,672 | 12,144 | 12,515 | 13,266 | 14,109 | ||||||||||
| Other real estate owned and repossessed assets | – | – | – | – | – | ||||||||||
| Non-performing assets | $ | 11,672 | $ | 12,144 | $ | 12,515 | $ | 13,266 | $ | 14,109 | |||||
| Allowance for loan losses | $ | 11,184 | $ | 11,214 | $ | 11,202 | $ | 11,115 | $ | 10,826 | |||||
| Non-performing loans / Loans excluding held-for-sale | 1.26 | % | 1.31 | % | 1.36 | % | 1.40 | % | 1.53 | % | |||||
| Non-performing assets / Assets | 0.70 | % | 0.73 | % | 0.79 | % | 0.84 | % | 0.98 | % | |||||
| Allowance for loan losses / Loans excluding held-for-sale | 1.21 | % | 1.21 | % | 1.22 | % | 1.18 | % | 1.18 | % | |||||
| QNB Corp. | |||||||||||||||||||||||||||
| Consolidated Selected Financial Data (unaudited) | |||||||||||||||||||||||||||
| (Dollars in thousands, except per share data) | Three months ended, | Year ended, | |||||||||||||||||||||||||
| For the period: | 12/31/21 | 9/30/21 | 6/30/21 | 3/31/21 | 12/31/20 | 12/31/21 | 12/31/20 | ||||||||||||||||||||
| Interest income | $ | 11,938 | $ | 11,721 | $ | 11,380 | $ | 11,731 | $ | 10,859 | $ | 46,770 | $ | 43,693 | |||||||||||||
| Interest expense | 1,130 | 1,137 | 1,162 | 1,214 | 1,338 | 4,643 | 6,445 | ||||||||||||||||||||
| Net interest income | 10,808 | 10,584 | 10,218 | 10,517 | 9,521 | 42,127 | 37,248 | ||||||||||||||||||||
| Provision for loan losses | – | – | 183 | 275 | 250 | 458 | 1,250 | ||||||||||||||||||||
| Net interest income after provision for loan losses | 10,808 | 10,584 | 10,035 | 10,242 | 9,271 | 41,669 | 35,998 | ||||||||||||||||||||
| Non-interest income: | |||||||||||||||||||||||||||
| Fees for services to customers | 368 | 363 | 296 | 299 | 363 | 1,326 | 1,315 | ||||||||||||||||||||
| ATM and debit card | 693 | 687 | 709 | 593 | 593 | 2,682 | 2,195 | ||||||||||||||||||||
| Retail brokerage and advisory income | 208 | 218 | 193 | 167 | 158 | 786 | 581 | ||||||||||||||||||||
| Net realized gain on investment securities | 766 | 404 | 294 | 342 | 242 | 1,806 | 609 | ||||||||||||||||||||
| Unrealized gain (loss) on equity securities | 87 | (836 | ) | 579 | 1,096 | 1,100 | 926 | (47 | ) | ||||||||||||||||||
| Net gain on sale of loans | 58 | 65 | 120 | 352 | 689 | 595 | 1,724 | ||||||||||||||||||||
| Other | 348 | 414 | 343 | 555 | 402 | 1,660 | 1,225 | ||||||||||||||||||||
| Total non-interest income | 2,528 | 1,315 | 2,534 | 3,404 | 3,547 | 9,781 | 7,602 | ||||||||||||||||||||
| Non-interest expense: | |||||||||||||||||||||||||||
| Salaries and employee benefits | 4,540 | 4,554 | 4,342 | 4,017 | 4,302 | 17,453 | 16,541 | ||||||||||||||||||||
| Net occupancy and furniture and equipment | 1,273 | 1,249 | 1,205 | 1,288 | 1,297 | 5,015 | 4,914 | ||||||||||||||||||||
| Other | 2,322 | 1,987 | 2,202 | 2,018 | 2,012 | 8,529 | 7,500 | ||||||||||||||||||||
| Total non-interest expense | 8,135 | 7,790 | 7,749 | 7,323 | 7,611 | 30,997 | 28,955 | ||||||||||||||||||||
| Income before income taxes | 5,201 | 4,109 | 4,820 | 6,323 | 5,207 | 20,453 | 14,645 | ||||||||||||||||||||
| Provision for income taxes | 1,052 | 685 | 951 | 1,273 | 1,056 | 3,961 | 2,562 | ||||||||||||||||||||
| Net income | $ | 4,149 | $ | 3,424 | $ | 3,869 | $ | 5,050 | $ | 4,151 | $ | 16,492 | $ | 12,083 | |||||||||||||
| Share and Per Share Data: | |||||||||||||||||||||||||||
| Net income – basic | $ | 1.17 | $ | 0.96 | $ | 1.09 | $ | 1.42 | $ | 1.17 | $ | 4.64 | $ | 3.42 | |||||||||||||
| Net income – diluted | $ | 1.17 | $ | 0.96 | $ | 1.09 | $ | 1.42 | $ | 1.17 | $ | 4.64 | $ | 3.42 | |||||||||||||
| Book value | $ | 38.41 | $ | 38.25 | $ | 38.58 | $ | 37.10 | $ | 37.79 | $ | 38.41 | $ | 37.79 | |||||||||||||
| Cash dividends | $ | 0.35 | $ | 0.35 | $ | 0.35 | $ | 0.35 | $ | 0.34 | $ | 1.40 | $ | 1.36 | |||||||||||||
| Average common shares outstanding – basic | 3,549,584 | 3,554,664 | 3,556,550 | 3,555,028 | 3,551,524 | 3,553,949 | 3,537,323 | ||||||||||||||||||||
| Average common shares outstanding – diluted | 3,550,542 | 3,555,832 | 3,557,243 | 3,555,028 | 3,551,524 | 3,554,138 | 3,537,360 | ||||||||||||||||||||
| Selected Ratios: | |||||||||||||||||||||||||||
| Return on average assets | 0.98 | % | 0.84 | % | 0.98 | % | 1.40 | % | 1.16 | % | 1.04 | % | 0.90 | % | |||||||||||||
| Return on average shareholders’ equity | 11.82 | % | 9.92 | % | 11.53 | % | 15.70 | % | 12.95 | % | 12.19 | % | 9.76 | % | |||||||||||||
| Net interest margin (tax equivalent) | 2.68 | % | 2.72 | % | 2.74 | % | 3.07 | % | 2.82 | % | 2.79 | % | 2.92 | % | |||||||||||||
| Efficiency ratio (tax equivalent) | 59.29 | % | 64.47 | % | 59.95 | % | 52.00 | % | 57.51 | % | 58.69 | % | 63.58 | % | |||||||||||||
| Average shareholders’ equity to total average assets | 8.33 | % | 8.43 | % | 8.53 | % | 8.90 | % | 8.98 | % | 8.53 | % | 9.21 | % | |||||||||||||
| Net loan charge-offs (recoveries) | $ | 30 | $ | (12 | ) | $ | 96 | $ | (14 | ) | $ | 189 | $ | 100 | $ | 311 | |||||||||||
| Net loan charge-offs (recoveries) – annualized / Average loans excluding held-for-sale | 0.01 | % | -0.01 | % | 0.04 | % | -0.01 | % | 0.08 | % | 0.01 | % | 0.04 | % | |||||||||||||
| Balance Sheet (Average) | |||||||||||||||||||||||||||
| Assets | $ | 1,672,267 | $ | 1,623,704 | $ | 1,577,417 | $ | 1,466,520 | $ | 1,419,412 | $ | 1,585,627 | $ | 1,343,984 | |||||||||||||
| Investment securities (AFS & Equities) | 690,792 | 600,355 | 522,204 | 447,290 | 438,202 | 565,924 | 390,906 | ||||||||||||||||||||
| Loans receivable | 918,631 | 922,187 | 938,849 | 932,617 | 904,474 | 928,017 | 868,461 | ||||||||||||||||||||
| Deposits | 1,440,611 | 1,389,149 | 1,345,498 | 1,258,815 | 1,218,170 | 1,359,100 | 1,150,411 | ||||||||||||||||||||
| Shareholders’ equity | 139,227 | 136,888 | 134,594 | 130,473 | 127,496 | 135,324 | 123,790 | ||||||||||||||||||||
