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QUAKERTOWN, Pa., April 26, 2022 (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 first quarter of 2022 of $3,710,000, or $1.04 per share on a diluted basis. This compares to net income of $5,050,000, or $1.42 per share on a diluted basis, for the same period in 2021.
For the quarter ended March 31, 2022, the annualized rate of return on average assets and average shareholders’ equity was 0.90% and 10.60%, respectively, compared with 1.40% and 15.70%, respectively, for the first quarter 2021.
The operating performance of the Bank, a wholly-owned subsidiary of QNB Corp., declined for the quarter ended March 31, 2022 in comparison with the same period in 2021 due to reduced non-interest income. The change in contribution from QNB Corp. for the quarter ended March 31, 2022, compared with the same period in 2021, 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, | |||||||||||
| 3/31/2022 | 3/31/2021 | Variance | |||||||||
| QNB Bank | $ | 3,708,000 | $ | 4,038,000 | $ | (330,000 | ) | ||||
| QNB Corp | 2,000 | 1,012,000 | (1,010,000 | ) | |||||||
| Consolidated net income | $ | 3,710,000 | $ | 5,050,000 | $ | (1,340,000 | ) | ||||
Total assets as of March 31, 2022 were $1,647,986,000 compared with $1,673,340,000 at December 31, 2021. Total available for sale debt securities decreased $35,514,000, or 5.1%, to $656,846,000, due primarily to the reduction in fair value of the portfolio, in response to the rise in interest rates during the period. Total deposits increased $2,008,000 to $1,451,753,000. The Bank participated in both rounds of the Small Business Administration’s Paycheck Protection Program (“PPP”). Loans receivable, excluding PPP, grew $7,900,000 to approximately $920,500,000 since December 31, 2021.
“The quarter, while not record-setting, provided solid shareholder returns of $1.04 per share. We are pleased with the operating performance at the bank, our very strong credit quality and continued household growth,” stated David W. Freeman, President and Chief Executive Officer.
Net Interest Income and Net Interest Margin
Net interest income for the quarter ended March 31, 2022 totaled $10,736,000, an increase of $219,000 from the same period in 2021. The net interest margin for the first quarters of 2022 and 2021 was 2.71% and 3.07%, respectively. The yield on average earning assets decreased 44 basis points to 2.97% for the first quarter of 2022, compared with 3.41% the first quarter of 2021. The cost of interest-bearing liabilities decreased to 0.34% for the quarter, compared with 0.44% for the same period in 2021. Proceeds from average deposit growth, PPP loan forgiveness and excess cash over the past year were invested in available-for-sale securities, primarily mortgage-backed securities, which comprised 42.7% of average earnings assets in the first quarter of 2022, compared with 30.7% for the same period in 2021. This increase in marketable securities as a percent of earnings assets is the primary reason for the reduction in net interest margin, as these securities yield less than loans.
Asset Quality, Provision for Loan Loss and Allowance for Loan Loss
QNB recorded no provision for loan losses in the first quarter of 2022, compared with $275,000 in provision for the same period in 2021. QNB’s allowance for loan losses of $11,231,000 represents 1.21% of loans receivable at March 31, 2022 compared to $11,184,000, or 1.21% of loans receivable at December 31, 2021. Net loan recoveries for the quarter ended March 31, 2022 and 2021 were $47,000 and $14,000, respectively.
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 $11,647,000, or 1.26% of loans receivable at March 31, 2022, compared with $11,672,000, or 1.26% of loans receivable at December 31, 2021. 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 March 31, 2022, $4,144,000, or approximately 57% of the loans classified as non-accrual are current or past due less than 30 days. At March 31, 2022, commercial substandard or doubtful loans totaled $19,072,000, compared with $18,531,000 reported at December 31, 2021.
Non-Interest Income
Total non-interest income was $1,611,000 for the first quarter of 2022, a decrease of $1,793,000 compared with the same period in 2021, due largely to a $1,104,000 decrease in the change in unrealized net gains on investment securities, a $306,000 decrease in realized gains on sale of securities to $36,000 and decreased net gains on sale of loans of $352,000, when comparing the two periods. The equities portfolio comprises blue-chip large-capitalized stocks, providing a taxable equivalent dividend yield of 3.20%.
Fees for services to customers increased $85,000, or 28.4% when comparing the first quarter 2022 to the same period in 2021, primarily due to increased overdraft occurrences when comparing the two periods. ATM and debit card income increased $48,000, or 8.1% when comparing the first quarter 2022 to the same period in 2021, due to increased card activity. Retail brokerage income increased $38,000, or 22.8% due to increased assets under management. Other non-interest income decreased $202,000 due primarily to a life insurance benefit of $193,000 realized during the first quarter of 2021.
Non-Interest Expense
Total non-interest expense was $7,813,000 for the first quarter of 2022, increasing $490,000, or 6.7% compared with the same period in 2021. Salaries and benefits expense increased $249,000, or 6.2%, to $4,266,000 when comparing the two quarters. Salary expense and related payroll taxes increased $178,000 to $3,606,000, or 5.2%, during the first quarter of 2022 compared to the same period in 2021, due to decreased deferred loan origination cost of $97,000, increased salary and related taxes of $71,000, and increased incentive compensation of $11,000. Benefits expense increased $71,000, or 11.9%, due primarily to increased medical insurance claims expense, when comparing the two periods.
Net occupancy, furniture and equipment expense decreased $23,000, or 1.8%, to $1,265,000 for the first quarter 2022, 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 $264,000, or 13.1% when comparing the first quarter of 2022 with the first quarter of 2021, due to increases in legal, consulting and third-party expenses, increased FDIC insurance costs, increased travel and entertainment expense, and increased check fraud cost, offset in part by lower marketing and loan origination expenses, when comparing the two periods.
Provision for income taxes decreased $449,000, to $824,000 in the first quarter 2022, compared with the same period in 2021, due to the decrease in pre-tax income. The effective tax rates for the quarter ended March 31, 2022 was 18.2%. This compares with an effective tax rate for the same period in 2021 of 20.1%.
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, 2021. 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) | 3/31/22 | 12/31/21 | 9/30/21 | 6/30/21 | 3/31/21 | ||||||||||
| Assets | $ | 1,647,986 | $ | 1,673,340 | $ | 1,658,544 | $ | 1,575,353 | $ | 1,570,519 | |||||
| Cash and cash equivalents | 13,260 | 13,390 | 24,160 | 56,621 | 108,733 | ||||||||||
| Investment securities | |||||||||||||||
| Debt securities, AFS | 656,846 | 692,360 | 664,053 | 549,385 | 469,103 | ||||||||||
| Equity securities | 12,652 | 12,410 | 15,084 | 15,445 | 14,522 | ||||||||||
| Loans held-for-sale | – | – | 2,706 | 5,018 | 3,210 | ||||||||||
| Loans receivable | 926,369 | 926,470 | 923,778 | 920,923 | 945,645 | ||||||||||
| Allowance for loan losses | (11,231 | ) | (11,184 | ) | (11,214 | ) | (11,202 | ) | (11,115 | ) | |||||
| Net loans | 915,138 | 915,286 | 912,564 | 909,721 | 934,530 | ||||||||||
| Deposits | 1,451,753 | 1,449,745 | 1,431,825 | 1,343,733 | 1,341,616 | ||||||||||
| Demand, non-interest bearing | 242,024 | 243,006 | 248,282 | 235,548 | 253,857 | ||||||||||
| Interest-bearing demand, money market and savings | 1,046,074 | 1,038,366 | 1,010,547 | 931,724 | 905,766 | ||||||||||
| Time | 163,655 | 168,373 | 172,996 | 176,461 | 181,993 | ||||||||||
| Short-term borrowings | 76,738 | 68,476 | 71,426 | 75,021 | 64,947 | ||||||||||
| Long-term debt | 10,000 | 10,000 | 10,000 | 10,000 | 10,000 | ||||||||||
| Shareholders’ equity | 102,498 | 136,494 | 135,968 | 137,340 | 131,996 | ||||||||||
| Asset Quality Data (Period End) | |||||||||||||||
| Non-accrual loans | $ | 7,272 | $ | 7,530 | $ | 7,827 | $ | 8,185 | $ | 8,887 | |||||
| Loans past due 90 days or more and still accruing | – | – | – | ||||||||||||
| Restructured loans | 4,375 | 4,142 | 4,317 | 4,330 | 4,379 | ||||||||||
| Non-performing loans | 11,647 | 11,672 | 12,144 | 12,515 | 13,266 | ||||||||||
| Other real estate owned and repossessed assets | – | – | – | – | – | ||||||||||
| Non-performing assets | $ | 11,647 | $ | 11,672 | $ | 12,144 | $ | 12,515 | $ | 13,266 | |||||
| Allowance for loan losses | $ | 11,231 | $ | 11,184 | $ | 11,214 | $ | 11,202 | $ | 11,115 | |||||
| Non-performing loans / Loans excluding held-for-sale | 1.26 | % | 1.26 | % | 1.31 | % | 1.36 | % | 1.40 | % | |||||
| Non-performing assets / Assets | 0.71 | % | 0.70 | % | 0.73 | % | 0.79 | % | 0.84 | % | |||||
| Allowance for loan losses / Loans excluding held-for-sale | 1.21 | % | 1.21 | % | 1.21 | % | 1.22 | % | 1.18 | % | |||||
| QNB Corp. | |||||||||||||||
| Consolidated Selected Financial Data (unaudited) | |||||||||||||||
| (Dollars in thousands, except per share data) | Three months ended, | ||||||||||||||
| For the period: | 3/31/22 | 12/31/21 | 9/30/21 | 6/30/21 | 3/31/21 | ||||||||||
| Interest income | $ | 11,809 | $ | 11,938 | $ | 11,721 | $ | 11,380 | $ | 11,731 | |||||
| Interest expense | 1,073 | 1,130 | 1,137 | 1,162 | 1,214 | ||||||||||
| Net interest income | 10,736 | 10,808 | 10,584 | 10,218 | 10,517 | ||||||||||
| Provision for loan losses | – | – | – | 183 | 275 | ||||||||||
| Net interest income after provision for loan losses | 10,736 | 10,808 | 10,584 | 10,035 | 10,242 | ||||||||||
| Non-interest income: | |||||||||||||||
| Fees for services to customers | 384 | 368 | 363 | 296 | 299 | ||||||||||
| ATM and debit card | 641 | 693 | 687 | 709 | 593 | ||||||||||
| Retail brokerage and advisory income | 205 | 208 | 218 | 193 | 167 | ||||||||||
| Net realized gain on investment securities | 36 | 766 | 404 | 294 | 342 | ||||||||||
| Unrealized gain (loss) on equity securities | (8 | ) | 87 | (836 | ) | 579 | 1,096 | ||||||||
| Net gain on sale of loans | – | 58 | 65 | 120 | 352 | ||||||||||
| Other | 353 | 348 | 414 | 343 | 555 | ||||||||||
| Total non-interest income | 1,611 | 2,528 | 1,315 | 2,534 | 3,404 | ||||||||||
| Non-interest expense: | |||||||||||||||
| Salaries and employee benefits | 4,266 | 4,540 | 4,554 | 4,342 | 4,017 | ||||||||||
| Net occupancy and furniture and equipment | 1,265 | 1,273 | 1,249 | 1,205 | 1,288 | ||||||||||
| Other | 2,282 | 2,322 | 1,987 | 2,202 | 2,018 | ||||||||||
| Total non-interest expense | 7,813 | 8,135 | 7,790 | 7,749 | 7,323 | ||||||||||
| Income before income taxes | 4,534 | 5,201 | 4,109 | 4,820 | 6,323 | ||||||||||
| Provision for income taxes | 824 | 1,052 | 685 | 951 | 1,273 | ||||||||||
| Net income | $ | 3,710 | $ | 4,149 | $ | 3,424 | $ | 3,869 | $ | 5,050 | |||||
| Share and Per Share Data: | |||||||||||||||
| Net income – basic | $ | 1.04 | $ | 1.17 | $ | 0.96 | $ | 1.09 | $ | 1.42 | |||||
| Net income – diluted | $ | 1.04 | $ | 1.17 | $ | 0.96 | $ | 1.09 | $ | 1.42 | |||||
| Book value | 28.81 | $ | 38.41 | $ | 38.25 | $ | 38.58 | $ | 37.10 | ||||||
| Cash dividends | $ | 0.36 | $ | 0.35 | $ | 0.35 | $ | 0.35 | $ | 0.35 | |||||
| Average common shares outstanding – basic | 3,552,854 | 3,549,584 | 3,554,664 | 3,556,550 | 3,555,028 | ||||||||||
| Average common shares outstanding – diluted | 3,554,456 | 3,550,542 | 3,555,832 | 3,557,243 | 3,555,028 | ||||||||||
| Selected Ratios: | |||||||||||||||
| Return on average assets | 0.90 | % | 0.98 | % | 0.84 | % | 0.98 | % | 1.40 | % | |||||
| Return on average shareholders’ equity | 10.60 | % | 11.82 | % | 9.92 | % | 11.53 | % | 15.70 | % | |||||
| Net interest margin (tax equivalent) | 2.71 | % | 2.68 | % | 2.72 | % | 2.74 | % | 3.07 | % | |||||
| Efficiency ratio (tax equivalent) | 62.35 | % | 59.29 | % | 64.47 | % | 59.95 | % | 52.00 | % | |||||
| Average shareholders’ equity to total average assets | 8.47 | % | 8.33 | % | 8.43 | % | 8.53 | % | 8.90 | % | |||||
| Net loan charge-offs (recoveries) | $ | (47 | ) | $ | 30 | $ | (12 | ) | $ | 96 | $ | (14 | ) | ||
| Net loan charge-offs (recoveries) – annualized / Average loans excluding held-for-sale | -0.02 | % | 0.01 | % | -0.01 | % | 0.04 | % | -0.01 | % | |||||
| Balance Sheet (Average) | |||||||||||||||
| Assets | $ | 1,675,385 | $ | 1,672,267 | $ | 1,623,704 | $ | 1,577,417 | $ | 1,466,520 | |||||
| Investment securities (AFS & Equities) | 710,109 | 690,792 | 600,355 | 522,204 | 447,290 | ||||||||||
| Loans receivable | 918,602 | 918,631 | 922,187 | 938,849 | 932,617 | ||||||||||
| Deposits | 1,444,049 | 1,440,611 | 1,389,149 | 1,345,498 | 1,258,815 | ||||||||||
| Shareholders’ equity | 141,986 | 139,227 | 136,888 | 134,594 | 130,473 | ||||||||||
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