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QNB Corp. Reports Earnings For Third Quarter 2019

QUAKERTOWN, Pa., Oct. 25, 2019 /PRNewswire/ -- QNB Corp. (the "Company" or "QNB") (OTC Bulletin Board: QNBC), the parent company of QNB Bank (the "Bank"), reported net income for the third quarter of 2019 of $3,090,000, or $0.88 per share on a diluted basis. This compares to net income of $3,211,000, or $0.92 per share on a diluted basis, for the same period in 2018.  For the nine months ended September 30, 2019, QNB reported net income of $9,612,000, or $2.75 per share on a diluted basis. This compares to net income of $9,008,000, or $2.59 per share on a diluted basis, reported for the same period in 2018.

For the quarter ended September 30, 2019, the annualized rate of return on average assets and average shareholders' equity was 1.00% and 10.39%, respectively, compared with 1.07% and 11.64%, respectively, for the third quarter 2018.  For the nine months ended September 30, 2019, the annualized rate of return on average assets and average shareholders' equity was 1.07% and 11.11%, respectively, compared with 1.03% and 11.23%, respectively, for the same period in 2018.

"QNB is pleased to report increased net income and earnings per share for the nine-month period ending September 30, 2019," said David W. Freeman, President and Chief Executive Officer.  "During this time, the Bank has experienced strong loan, deposit, and household growth.  In August, we opened a full-service branch in Allentown.  We are pleased to establish a physical presence in Allentown, already serving the Lehigh Valley from our Wescosville and Coopersburg locations."

Net Interest Income and Net Interest Margin

Net interest income for the quarter and nine months ended September 30, 2019 totaled $9,182,000 and $27,129,000, respectively, an increase of $478,000 and $934,000, respectively, from the same periods in 2018. The net interest margin for the third quarter of 2019 was 3.14% compared with 3.06% for the third quarter of 2018.  Net interest margin for the nine months ended September 30, 2019 was 3.17%, an increase of three basis points compared to the same period in 2018.  The yield on average earning assets increased 19 basis points to 4.02% for the third quarter of 2019, compared with the third quarter of 2018.  For the nine months ended September 30, 2019, the yield on average earning assets was 4.05%, compared with 3.82% for the same period in 2018.   The cost of interest-bearing liabilities increased to 1.10% and 1.09% for the quarter and nine months ended September 30, 2019, respectively, compared with 0.93% and 0.83% for the same periods in 2018.

Asset Quality, Provision for Loan Loss and Allowance for Loan Loss

QNB recorded a $550,000 provision for loan losses in the third quarter of 2019, compared with $568,000 for the same period in 2018.   For the nine months ended September 30, 2019 and 2018, QNB recorded $925,000 and $943,000, respectively, in provision for loan losses.  QNB's allowance for loan losses of $9,494,000 represents 1.14% of loans receivable at September 30, 2019 compared to $8,834,000, or 1.12% of loans receivable at December 31, 2018, and $8,645,000, or 1.10% of loans receivable at September 30, 2018.  Net loan charge-offs were $265,000 for the first nine months of 2019, or 0.04% annualized of total average loans, compared with net charge-offs of $139,000, or 0.02% annualized of total average loans, for the same period in 2018.

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 $14,088,000, or 1.70% of loans receivable at September 30, 2019, compared with $9,638,000, or 1.23% of loans receivable at December 31, 2018, and $10,890,000, or 1.39% of loans receivable at September 30, 2018.  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 September 30, 2019, $7,507,000, or approximately 60% of the loans classified as non-accrual are current or past due less than 30 days.  At September 30, 2019 commercial substandard or doubtful loans totaled $16,985,000, compared with $18,339,000 reported at December 31, 2018 and $20,103,000 reported at September 30, 2018.  The change from year-end 2018 reflects an upgrade to pass ratings due to improved financial performance of two large commercial relationships, a payoff of a classified loan due to the sale of the collateral by the borrower during the second quarter of 2019, and a large commercial relationship downgrade during the third quarter 2019.

Non-Interest Income

Total non-interest income was $2,144,000 for the third quarter of 2019, a decrease of $83,000, or 3.7%, compared with the same period in 2018, due to combined realized and unrealized net gains on investment securities totaling $668,000 in 2019 compared to  $912,000 in 2018.  Non-interest income for the nine months ended September 30, 2019 was $6,107,000, an increase of $1,359,000, or 28.6%, compared to the same period in 2018.  All other categories of fee income increased during the third quarter 2019, when compared to the third quarter 2018. 

Non-Interest Expense

Total non-interest expense was $6,955,000 for the third quarter of 2019, increasing $570,000, or 8.9%, from $6,385,000 for the same period in 2018.  For the nine months ended September 30, 2019, non-interest expense increased $1,376,000, or 7.2%, from the same period in 2018.  Salaries and benefits expense increased $451,000, or 12.5%, to $4,063,000 when comparing the two quarters.  Salary expense and related payroll taxes increased $339,000 to $3,508,000, or 9.6%, during the third quarter of 2019 compared to the same period in 2018, due, in part, to the addition of branch staff in our new Allentown location.  Benefits expense increased $112,000, or 25.3%, due primarily to medical insurance claims reimbursements and increased retirement plan costs, when comparing the two periods.  

Net occupancy and furniture and equipment expense increased $123,000, or 12.3%, to $1,123,000 for the third quarter 2019 compared with the same period in 2018, due primarily to increased building and furniture depreciation expense, increased rent expense and computer software amortization and maintenance expense.  Other non-interest expense decreased $4,000 when comparing the third quarter of 2019 with the third quarter of 2018, with increased marketing, travel and entertainment and check card expenses offset by decreased FDIC insurance costs.  During the third quarter 2019, we received a "small bank assessment credit", applicable for our second quarter FDIC insurance assessment in the amount of $135,000.  The FDIC insurance fund was determined to be over-funded, and small institutions were eligible for a payment credit. 

Provision for income taxes decreased $36,000, or 4.7%, to $731,000 in the third quarter 2019, due to reduced taxable income when comparing the two periods.  The effective tax rates for the quarter and nine months ended September 30, 2019 were 19.1% and 18.8%, respectively.  This compares with effective tax rates for the same periods in 2018 of 19.3% and 17.4%, respectively.  The increase in the tax rates is due to the proportional increase of taxable income, a result of reduced municipal bonds and increased securities realized and unrealized gains, when comparing the two periods.

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, 2018. 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)

9/30/19


6/30/19


3/31/19


12/31/18


9/30/18


Assets

$

1,245,863


$

1,212,005


$

1,203,126


$

1,175,452


$

1,184,389


Cash and cash equivalents


20,787



14,068



13,708



13,458



13,982


Investment securities
















Debt securities


361,157



347,728



344,367



344,221



347,392


Equity securities


5,850



6,898



10,482



9,421



10,436


Loans held-for-sale


240



-



-



-



154


Loans receivable


830,556



817,593



804,528



785,448



785,962


Allowance for loan losses


(9,494)



(9,164)



(9,015)



(8,834)



(8,645)


Net loans


821,062



808,429



795,513



776,614



777,317


Deposits


1,048,189



1,030,661



1,034,614



1,015,598



1,024,565


Demand, non-interest bearing


150,944



149,591



139,970



128,615



128,089


Interest-bearing demand, money market
and savings


661,414



646,759



671,925



663,195



672,467


Time


235,831



234,311



222,719



223,788



224,009


Short-term borrowings


69,945



59,048



49,897



50,872



55,923


Shareholders' equity


118,985



115,878



110,360



104,348



98,834


















Asset Quality Data (Period End)
















Non-accrual loans

$

12,445


$

7,668


$

7,706


$

7,478


$

9,631


Loans past due 90 days or more and still
accruing


-



-



-



-



-


Restructured loans


1,643



2,009



2,047



2,160



1,259


Non-performing loans


14,088



9,677



9,753



9,638



10,890


Other real estate owned and repossessed
assets


-



-



-



-



-


Non-performing assets

$

14,088


$

9,677


$

9,753


$

9,638


$

10,890


















Allowance for loan losses

$

9,494


$

9,164


$

9,015


$

8,834


$

8,645


















Non-performing loans / Loans excluding
held-for-sale


1.70

%


1.18

%


1.21

%


1.23

%


1.39

%

Non-performing assets / Assets


1.13

%


0.80

%


0.81

%


0.82

%


0.92

%

Allowance for loan losses / Loans
excluding held-for-sale


1.14

%


1.12

%


1.12

%


1.12

%


1.10

%

 

QNB Corp.


Consolidated Selected Financial Data (unaudited)

























(Dollars in thousands,
except per share data)

Three months ended,



Nine months ended,


For the period:

9/30/19


6/30/19


3/31/19


12/31/18


9/30/18



9/30/19


9/30/18

























Interest income

$

11,817


$

11,712


$

11,289


$

11,203


$

10,926



$

34,818


$

31,997


Interest expense


2,635



2,601



2,453



2,383



2,222




7,689



5,802


Net interest income


9,182



9,111



8,836



8,820



8,704




27,129



26,195


Provision for loan losses


550



150



225



187



568




925



943


Net interest income
after provision
    for loan losses


8,632



8,961



8,611



8,633



8,136




26,204



25,252


Non-interest income:























Fees for services to
customers


432



422



393



451



419




1,247



1,248


ATM and debit card


533



519



470



502



476




1,522



1,393


Retail brokerage and
advisory income


145



133



141



66



96




419



304


Net gain (loss) on
investment securities
    available-for-sale


973



584



6



(390)



181




1,563



314


Unrealized gain (loss)
on equity securities


(305)



(405)



976



(862)



731




266



526


Net gain (loss) from
trading activity


-



-



-



-



-




-



-


Net gain on sale of
loans


63



28



21



23



38




112



82


Other


303



373



302



354



286




978



881


  Total non-interest
  income


2,144



1,654



2,309



144



2,227




6,107



4,748


Non-interest expense:























Salaries and employee
benefits


4,063



3,790



3,781



3,827



3,612




11,634



10,584


Net occupancy and
furniture and
   equipment


1,123



1,097



1,062



1,068



1,000




3,282



2,969


Other


1,769



1,906



1,881



1,894



1,773




5,556



5,543


  Total non-interest 
  expense


6,955



6,793



6,724



6,789



6,385




20,472



19,096


Income before
income taxes


3,821



3,822



4,196



1,988



3,978




11,839



10,904


Provision for income
taxes


731



679



817



(339)



767




2,227



1,896


Net income

$

3,090


$

3,143


$

3,379


$

2,327


$

3,211



$

9,612


$

9,008

























 

Share and Per Share Data:























Net income - basic

$

0.88


$

0.90


$

0.97


$

0.67


$

0.93



$

2.75


$

2.60


Net income - diluted

$

0.88


$

0.90


$

0.97


$

0.67


$

0.92



$

2.75


$

2.59


Book value

$

33.92


$

33.09


$

31.59


$

29.95


$

28.47



$

33.92


$

28.47


Cash dividends

$

0.33


$

0.33


$

0.33


$

0.32


$

0.32



$

0.99


$

0.96


Average common shares
outstanding

   - basic


3,501,771



3,494,620



3,486,786



3,473,965



3,466,672




3,494,471



3,459,906


Average common shares
outstanding

  - diluted


3,508,317



3,502,111



3,494,429



3,492,060



3,489,061




3,501,507



3,480,980

























Selected Ratios:























Return on average assets


1.00

%


1.05

%


1.15

%


0.78

%


1.07

%



1.07

%


1.03

%

Return on average
shareholders' equity


10.39

%


10.91

%


12.09

%


8.29

%


11.64

%



11.11

%


11.23

%

Net interest margin (tax
equivalent)


3.14

%


3.20

%


3.18

%


3.11

%


3.06

%



3.17

%


3.14

%

Efficiency ratio (tax
equivalent)


60.34

%


61.97

%


59.28

%


74.03

%


57.31

%



60.52

%


60.52

%

Average shareholders'
equity to total

   average assets


9.63

%


9.61

%


9.54

%


9.38

%


9.20

%



9.59

%


9.13

%

Net loan charge-offs
(recoveries)

$

220


$

1


$

44


$

(2)


$

115



$

265


$

139


Net loan charge-offs
(recoveries) -

   annualized / Average
loans excluding

   held-for-sale


0.11

%


0.00

%


0.02

%


0.00

%


0.06

%



0.04

%


0.02

%

Balance Sheet
(Average)





-


















Assets

$

1,225,776


$

1,202,406


$

1,187,374


$

1,186,456


$

1,190,132



$

1,205,326


$

1,173,695


Investment securities
(AFS &  Equities)


359,549



357,836



360,640



366,469



368,807




359,338



374,938


Loans receivable


822,738



805,538



789,737



784,372



780,221




806,126



760,733


Deposits


1,044,094



1,021,925



1,008,060



1,018,141



1,023,227




1,024,826



998,104


Shareholders' equity


117,984



115,551



113,304



111,312



109,433




115,629



107,206


 

Cision

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