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QNB Corp. Reports Earnings Increase For First Quarter 2019

Company Release - 4/23/2019 2:05 PM ET

QUAKERTOWN, Pa., April 23, 2019 /PRNewswire/ -- QNB Corp. (the "Company" or "QNB") (OTC Bulletin Board: QNBC), the parent company of QNB Bank, reported net income for the first quarter of 2019 of $3,379,000, or $0.97 per share on a diluted basis, compared to net income of $2,935,000, or $0.85 per share on a diluted basis, for the same period in 2018.  

Total assets as of March 31, 2019 were $1,203,126,000 compared with $1,175,452,000 at December 31, 2018. Loans receivable at March 31, 2019 were $804,528,000 compared with $785,448,000 at December 31, 2018, an increase of $19,080,000, or 2.4%.  Total deposits at March 31, 2019 were $1,034,614,000, increasing $19,016,000, or 1.9%, compared with $1,015,598,000 at December 31, 2018.

"Net income and diluted earnings per share grew 15.1% and 14.1%, respectively, compared to the first quarter of 2018," said David W. Freeman, President and Chief Executive Officer. "The loan, deposit, and household growth we saw in 2018 was sustained during first quarter 2019 and asset quality remains strong.  Also, our securities and advisory service platform conversion is substantially complete."

Net Interest Income and Net Interest Margin

Net interest income for the quarter ended March 31, 2019 totaled $8,835,000, an increase of $44,000, from the same period in 2018. The net interest margin was 3.18% for the first quarter of 2019 and 3.22% for first quarter 2018.  The yield on earning assets was 4.04% for the first quarter 2019, an increase of 21 basis points from 3.83% in the first quarter of 2018.  The cost of interest-bearing liabilities increased  31 basis points to 1.06% for the first quarter ended March 31, 2019, compared with 0.75% for the same period in 2018.

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

QNB recorded a $225,000 provision for loan losses in the first quarter of 2019 compared with $188,000 in the first quarter 2018.  QNB's allowance for loan losses of $9,015,000 represents 1.12% of loans receivable at March 31, 2019 compared to $8,834,000, or 1.12% of loans receivable at December 31, 2018, and $8,037,000, or 1.07% of loans receivable at March 31, 2018. Net loan charge-offs were $44,000 for the first quarter of 2019, or 0.02% annualized of total average loans, compared with net recoveries of $8,000 for the first quarter of 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 $9,753,000, or 1.21% of loans receivable at March 31, 2019, compared with $9,638,000, or 1.23% of loans receivable at December 31, 2018, and $8,327,000, or 1.11% of loans receivable at March 31, 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 March 31, 2019, $2,770,000, or approximately 36% of the loans classified as non-accrual are current or past due less than 30 days.  Commercial loans classified as substandard or doubtful, which includes non-performing loans, improved.  At March 31, 2019, substandard or doubtful loans totaled $ 14,721,000, a decrease of $3,618,000, or 19.7%, from the $18,339,000 reported at December 31, 2018 and a decrease of $2,695,000, or 15.5%, from the $17,416,000 reported at March 31, 2018.

Non-Interest Income

Total non-interest income was $2,309,000 for the first quarter of 2019, an increase of $1,242,000, or 116.4%, compared with the same period in 2018.  Increases in non-interest income comprise; net unrealized gain on investment securities , ATM and debit card, brokerage and advisory, other income and net gain on sale of loans, which increased $1,222,000, $40,000, and $38,000, $35,000, and $14,000 respectively, in first quarter 2019 compared with the same period in 2018.  Other fee income increases include $29,000 recorded for the broker-dealer conversion cost reimbursement and increased letter of credit income. The net unrealized gain on investment securities was $976,000 in the first quarter of 2019 compared with unrealized losses of equity securities of $246,000 for the same period in 2018.    

Fees for services to customers and realized gain on investment securities decreased $28,000, or 6.6%, and $79,000, or 92.9%,  respectively, when comparing the first quarter 2019 to the same period in 2018.  The decrease in fees for services to customers is due primarily to a decrease in overdraft income, while the decrease in gains on securities sales is a result of reduced opportunity for profitable sale of equities and a $39,000 net loss on sale of available for sale securities for a trade out of low-yielding mortgage-backed bonds into higher-yielding municipal bonds.

Non-Interest Expense

Total non-interest expense was $6,723,000 for the first quarter of 2019, increasing $545,000, or 8.8%, from $6,178,000  for the same period in 2018.  Salaries and benefits expense increased $436,000, or 13.0%, to $3,781,000 when comparing the two quarters.  Salary expense and related payroll taxes increased $275,000, or 9.6%, to $3,126,000 during the first quarter 2019 compared to the same period in 2018.  Medical premiums, retirement plan expense and post-retirement life insurance benefit expense increased $135,000, $9,000, and $13,000, respectively during the same period.   Net occupancy and furniture and equipment expense increased $103,000, or 10.8%, to $1,061,000 for the first quarter 2019, due primarily to increased depreciation of building and equipment of $49,000 and increased building and software maintenance expense totaling $48,000, when compared to first quarter 2018.  Other non-interest expense increased $6,000, or 0.3%, when comparing first quarter 2019 with first quarter 2018. 

Provision for income taxes increased 46.7%, to $817,000 in the first quarter 2019 due to increased pre-tax income and a higher proportion of taxable versus tax-free income, compared with the same period in 2018.  The effective tax rates for the first quarters of 2019 and 2018 were 19.5% and 16.0%, respectively, due to increased state income tax provisions related to the increase in unrealized gains on the equities portfolio.

About the Company

QNB Corp. is the holding company for QNB Bank, which is headquartered in Quakertown, Pennsylvania. QNB Bank currently operates eleven branches in Bucks, Montgomery and Lehigh Counties and offers commercial and retail banking services in the communities it serves.  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)

3/31/19


12/31/18


9/30/18


6/30/18


3/31/18


Assets

$

1,203,126


$

1,175,452


$

1,184,389


$

1,172,874


$

1,172,168


Cash and cash equivalents


13,708



13,458



13,982



11,726



29,870


Investment securities
















Available-for-sale


344,367



344,221



347,392



344,194



357,519


Equities


10,482



9,421



10,436



9,600



9,527


Loans held-for-sale


-



-



154



404



272


Loans receivable


804,528



785,448



785,962



779,886



750,187


Allowance for loan losses


(9,015)



(8,834)



(8,645)



(8,192)



(8,037)


Net loans


795,513



776,614



777,317



771,694



742,150


Deposits


1,034,614



1,015,598



1,024,565



985,726



1,006,369


Demand, non-interest bearing


139,970



128,615



128,089



135,482



135,040


Interest-bearing demand, money market and savings


671,925



663,195



672,467



627,525



639,078


Time


222,719



223,788



224,009



222,719



232,251


Short-term borrowings


49,897



50,872



55,923



85,646



64,879


Finance lease liability


1,878



-



-



-



-


Shareholders' equity


110,360



104,348



98,834



97,818



96,504


















Asset Quality Data (Period End)
















Non-accrual loans

$

7,706


$

7,478


$

9,631


$

6,731


$

7,053


Loans past due 90 days or more and still accruing


-



-



-



23



-


Restructured loans


2,047



2,160



1,259



1,233



1,274


Non-performing loans


9,753



9,638



10,890



7,987



8,327


Non-performing assets

$

9,753


$

9,638


$

10,890


$

7,987


$

8,327


















Allowance for loan losses

$

9,015


$

8,834


$

8,645


$

8,192


$

8,037


















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


1.21

%


1.23

%


1.39

%


1.02

%


1.11

%

Non-performing assets / Assets


0.82

%


0.82

%


0.92

%


0.68

%


0.71

%

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


1.12

%


1.12

%


1.10

%


1.05

%


1.07

%


















 

QNB Corp.


Consolidated Selected Financial Data (unaudited)


















(Dollars in thousands, except per share data)

Three months ended,


For the period:

3/31/19


12/31/18


9/30/18


6/30/18


3/31/18


















Interest income

$

11,289


$

11,203


$

10,926


$

10,562


$

10,509


Interest expense


2,454



2,383



2,222



1,862



1,718


Net interest income


8,835



8,820



8,704



8,700



8,791


Provision for loan losses


225



187



568



187



188


Net interest income after provision

    for loan losses


8,610



8,633



8,136



8,513



8,603


Non-interest income:
















Fees for services to customers


393



451



419



408



421


ATM and debit card


470



502



476



487



430


Retail brokerage and advisory income


141



66



96



105



103


Net gain on investment securities
  available-for-sale


6



(390)



181



48



85


Unrealized loss on available for sale equity securities


976



(862)



731



41



(246)


Net gain on sale of loans


21



23



38



37



7


Other


302



354



286



328



267


Total non-interest income


2,309



144



2,227



1,454



1,067


Non-interest expense:
















Salaries and employee benefits


3,781



3,827



3,612



3,627



3,345


Net occupancy and furniture and equipment


1,061



1,068



1,000



1,011



958


Other


1,881



1,894



1,773



1,895



1,875


Total non-interest expense


6,723



6,789



6,385



6,533



6,178


Income before income taxes


4,196



1,988



3,978



3,434



3,492


Provision for income taxes


817



(339)



767



572



557


Net income

$

3,379


$

2,327


$

3,211


$

2,862


$

2,935


















Share and Per Share Data:
















Net income - basic

$

0.97


$

0.67


$

0.93


$

0.83


$

0.85


Net income - diluted

$

0.97


$

0.67


$

0.92


$

0.82


$

0.85


Book value

$

31.59


$

29.95


$

28.47


$

28.23


$

27.94


Cash dividends

$

0.33


$

0.32


$

0.32


$

0.32


$

0.32


Average common shares outstanding - basic


3,486,786



3,473,965



3,466,672



3,460,360



3,452,531


Average common shares outstanding - diluted


3,494,429



3,492,060



3,489,061



3,481,312



3,472,905


















Selected Ratios:
















Return on average assets


1.15

%


0.78

%


1.07

%


0.98

%


1.02

%

Return on average shareholders' equity


12.09

%


8.29

%


11.64

%


10.70

%


11.35

%

Net interest margin (tax equivalent)


3.18

%


3.11

%


3.06

%


3.15

%


3.22

%

Efficiency ratio (tax equivalent)


59.28

%


74.03

%


57.31

%


63.08

%


61.42

%

Average shareholders' equity to total average assets


9.54

%


9.38

%


9.20

%


9.20

%


9.00

%

Net loan charge-offs (recoveries)

$

44


$

(2)


$

115


$

32


$

(8)


Net loan charge-offs (recoveries) - annualized /

      Average loans excluding held-for-sale


0.02

%


0.00

%


0.06

%


0.02

%


0.00

%

















Balance Sheet (Average)
















Assets

$

1,187,374


$

1,186,456


$

1,190,132


$

1,166,383


$

1,164,390


Investment securities (AFS, equities)


360,640



366,469



368,807



372,850



383,317


Loans receivable


789,737



784,372



780,221



757,451



744,132


Deposits


1,008,060



1,018,141



1,023,227



987,000



983,647


Shareholders' equity


113,304



111,312



109,433



107,301



104,832


 

 

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SOURCE QNB Bank