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QNB Corp. Reports Earnings For Second Quarter 2019

Company Release - 7/23/2019 4:38 PM ET

QUAKERTOWN, Pa., July 23, 2019 /PRNewswire/ -- QNB Corp. (the "Company" or "QNB") (OTC Bulletin Board: QNBC), the parent company of QNB Bank, reported net income for the second quarter of 2019 of $3,143,000, or $0.90 per share on a diluted basis, compared to net income of $2,862,000, or $0.82 per share on a diluted basis, for the same period in 2018.  For the six months ended June 30, 2019, QNB reported net income of $6,522,000, or $1.86 per share on a diluted basis. This compares to net income of $5,797,000, or $1.67 per share on a diluted basis, reported for the same period in 2018.

Total assets as of June 30, 2019 were $1,212,005,000 compared with $1,175,452,000 at December 31, 2018. Loans receivable at June 30, 2019 were $817,593,000 compared with $785,448,000 at December 31, 2018, an increase of $32,145,000, or 4.1%.  Total deposits at June 30, 2019 were $1,030,661,000, increasing $15,063,000, compared with $1,015,598,000 at December 31, 2018.

"QNB is pleased to report increased earnings and earnings per share for the second quarter and first half of 2019," said David W. Freeman, President and Chief Executive Officer.  "During the second quarter, we continued to see strong loan, deposit, and household growth throughout the communities the Bank serves. Asset quality and net interest margin improved as well."

Net Interest Income and Net Interest Margin

Net interest income for the quarter and six months ended June 30, 2019 totaled $9,111,000 and $17,947,000, respectively, an increase of $411,000 and $456,000, respectively, from the same periods in 2018. The net interest margin for the second quarter 2019 was 3.20% compared to 3.15% for the second quarter 2018.  Net interest margin for the six months ended June 30, 2019 was 3.19%, an increase of five basis points for the quarter and one basis point for the six  months ended June 30, 2019, respectively, compared to the same periods in 2018.

The yield on average earning assets improved 29 basis points to 4.10% for the second quarter 2019, compared with the second quarter 2018.  For the six months ended June 30, 2019, the yield on average earning assets was 4.07%, compared with 3.82% for the same period in 2018, primarily due the proportionate increase in loans as a percent of earning assets, along with increased rates.  The cost of interest-bearing liabilities increased 30 basis points to 1.11% for the quarter, and 31 basis points to 1.09% for the six months ended June 30, 2019, respectively, compared with the same periods in 2018.

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

QNB recorded a $150,000 provision for loan losses in the second quarter of 2019 compared with $187,000 in the second quarter 2018.  QNB's allowance for loan losses of $9,164,000 represents 1.12% of loans receivable at June 30, 2019 compared to $8,834,000, or 1.12% of loans receivable at December 31, 2018, and $8,192,000, or 1.05% of loans receivable at June 30, 2018. Net loan charge offs were $1,000 and $45,000 for the quarter and six months ended June 30, 2019, respectively, compared with $32,000 and $24,000 for the same periods in 2018, respectively.   Annualized net loan charge-offs for the quarter and six months ended June 30, 2019 were 0.00% and 0.01% of average loans receivable, 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 $9,677,000, or 1.18% of loans receivable at June 30, 2019, compared with $9,638,000, or 1.23% of loans receivable at December 31, 2018, and $7,987,000, or 1.02% of loans receivable at June 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 June 30, 2019, $2,172,000, or approximately 28% of the loans classified as non-accrual are current or past due less than 30 days.  Commercial loans classified as substandard or doubtful loans totaled $12,572,000 at June 30, 2019, a decrease of $5,767,000, or 31.4%, from the $18,339,000 reported at December 31, 2018, and a decrease of $5,627,000, or 30.9%, from the $18,199,000 reported at June 30, 2018.  The decrease is largely due to improved financial performance of two large commercial relationships resulting in upgrades to pass ratings, as well a payoff of a classified loan due to the sale of the collateral by the borrower.

Non-Interest Income

Total non-interest income was $1,654,000 for the second quarter of 2019, an increase of $200,000, or 13.8%, compared with the same period in 2018.  Increases in non-interest income comprise; net gain on the sale of investment securities, other income, ATM and debit card,  brokerage and advisory, and fees for services to customers, which increased $536,000, $45,000, $32,000, $28,000, and $14,000 respectively, in second quarter 2019 compared with the same period in 2018.  Other income increased $45,000 to $373,000, due to increased merchant fee income and the recording of a $58,000 deferred gain on sale of a bank-financed OREO property.  These increases were offset in part due to a reduction in miscellaneous income from $60,000 to $28,000.  The Company recorded a $53,000 sales tax refund during second quarter 2018.

Unrealized loss on equity securities decreased $446,000 when comparing the second quarter 2019 to the same period in 2018, due to the decrease in fair value of the equities portfolio.  Net gains on sale of loans decreased $9,000, due to reduced mortgage loan activity during the second quarter 2019, compared to the same period in 2018.

For the six months ended June 30, 2019, non-interest income was $3,963,000, an increase of $1,442,000, or 57.2%, compared to the same period in 2018, primarily due to net realized gains on the sale of investment securities of $457,000 and improved fair value of equity securities of $776,000, when comparing the two periods.

Non-Interest Expense

Total non-interest expense was $6,793,000 for the second quarter of 2019, increasing $260,000, or 4.0% from $6,533,000  for the same period in 2018.  Salaries and benefits expense increased $163,000, or 4.5%, to $3,790,000 when comparing the two quarters.  Salary expense and related payroll taxes increased $288,000, or 9.6%, to $3,277,000 during the second quarter 2019 compared to the same period in 2018 due to increased employees and salaries.  Retirement plan expenses increased $27,000, or 14.1%, for the same reasons.    Medical premiums decreased $152,000, or 29.5%, due to reduced medical claims when comparing the two periods.  Net occupancy and furniture and equipment expense increased $86,000, or 8.5%, to $1,097,000 for the second quarter 2019, due primarily to increased rent, building repairs and maintenance, depreciation of furniture and equipment and software maintenance expense of $19,000, $42,000, $36,000, and $25,000, respectively, offset in part by decreased software amortization, and equipment maintenance expense of $7,000 and $23,000, respectively, when comparing the two periods.  Other non-interest expense increased $11,000, or 0.6%, when comparing second quarter 2019 with second quarter 2018. 

For the six months ended June 30, 2019, non-interest expense was $13,517,000, an increase of $806,000, or 6.3%, compared to the same period in 2018.

Provision for income taxes increased 18.7%, to $679,000 in the second quarter 2019 due to increased pre-tax income and a higher effective tax rate,  compared with the same period in 2018.  The effective tax rates for the quarter and six months ended June 30, 2019  were 17.8% and 18.7%, respectively, compared with 16.7% and 16.3%, respectively, for the same periods in 2018.  The increase in effective tax rates is due to the increased proportional share of taxable versus non-taxable income during the quarter and six months ended June 30, 2019, compared with the same period in 2018.

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)

6/30/19


3/31/19


12/31/18


9/30/18


6/30/18


Assets

$

1,212,005


$

1,203,126


$

1,175,452


$

1,184,389


$

1,172,874


Cash and cash equivalents


14,068



13,708



13,458



13,982



11,726


Investment securities
















Debt securities, AFS


347,728



344,367



344,221



347,392



344,194


Equity securities


6,898



10,482



9,421



10,436



9,600


Loans held-for-sale


-



-



-



154



404


Loans receivable


817,593



804,528



785,448



785,962



779,886


Allowance for loan losses


(9,164)



(9,015)



(8,834)



(8,645)



(8,192)


Net loans


808,429



795,513



776,614



777,317



771,694


Deposits


1,030,661



1,034,614



1,015,598



1,024,565



985,726


Demand, non-interest bearing


149,591



139,970



128,615



128,089



135,482


Interest-bearing demand, money market and savings


646,759



671,925



663,195



672,467



627,525


Time


234,311



222,719



223,788



224,009



222,719


Short-term borrowings


59,048



49,897



50,872



55,923



85,646


Shareholders' equity


115,878



110,360



104,348



98,834



97,818


















Asset Quality Data (Period End)
















Non-accrual loans

$

7,668


$

7,706


$

7,478


$

9,631


$

6,731


Loans past due 90 days or more and still accruing


-



-



-



-



23


Restructured loans


2,009



2,047



2,160



1,259



1,233


Non-performing loans


9,677



9,753



9,638



10,890



7,987


Other real estate owned and repossessed assets


-



-



-



-



-


Non-performing assets

$

9,677


$

9,753


$

9,638


$

10,890


$

7,987


















Allowance for loan losses

$

9,164


$

9,015


$

8,834


$

8,645


$

8,192


















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


1.18

%


1.21

%


1.23

%


1.39

%


1.02

%

Non-performing assets / Assets


0.80

%


0.81

%


0.82

%


0.92

%


0.68

%

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


1.12

%


1.12

%


1.12

%


1.10

%


1.05

%

 

 

QNB Corp.


Consolidated Selected Financial Data (unaudited)

























(Dollars in thousands, except per share data)

Three months ended,



Six months ended,


For the period:

6/30/19


3/31/19


12/31/18


9/30/18


6/30/18



6/30/19


6/30/18

























Interest income

$

11,712


$

11,289


$

11,203


$

10,926


$

10,562



$

23,001


$

21,071


Interest expense


2,601



2,453



2,383



2,222



1,862




5,054



3,580


Net interest income


9,111



8,836



8,820



8,704



8,700




17,947



17,491


Provision for loan losses


150



225



187



568



187




375



375


Net interest income after provision
 
for loan losses


8,961



8,611



8,633



8,136



8,513




17,572



17,116


Non-interest income:























Fees for services to customers


422



393



451



419



408




815



829


ATM and debit card


519



470



502



476



487




989



917


Retail brokerage and advisory income


133



141



66



96



105




274



208


Net realized gain (loss) on investment securities


584



6



(390)



181



48




590



133


Unrealized gain (loss) on  equity securities


(405)



976



(862)



731



41




571



(205)


Net gain on sale of loans


28



21



23



38



37




49



44


Other


373



302



354



286



328




675



595


  Total non-interest income


1,654



2,309



144



2,227



1,454




3,963



2,521


Non-interest expense:























Salaries and employee benefits


3,790



3,781



3,827



3,612



3,627




7,571



6,972


Net occupancy and furniture and 
  equipment


1,097



1,062



1,068



1,000



1,011




2,159



1,969


Other


1,906



1,881



1,894



1,773



1,895




3,787



3,770


  Total non-interest expense


6,793



6,724



6,789



6,385



6,533




13,517



12,711


Income before income taxes


3,822



4,196



1,988



3,978



3,434




8,018



6,926


Provision for income taxes


679



817



(339)



767



572




1,496



1,129


Net income

$

3,143


$

3,379


$

2,327


$

3,211


$

2,862



$

6,522


$

5,797

























Share and Per Share Data:























Net income - basic

$

0.90


$

0.97


$

0.67


$

0.93


$

0.83



$

1.87


$

1.68


Net income - diluted

$

0.90


$

0.97


$

0.67


$

0.92


$

0.82



$

1.86


$

1.67


Book value

$

33.09


$

31.59


$

29.95


$

28.47


$

28.23



$

33.09


$

28.23


Cash dividends

$

0.33


$

0.33


$

0.32


$

0.32


$

0.32



$

0.66


$

0.64


Average common shares outstanding

   - basic


3,494,620



3,486,786



3,473,965



3,466,672



3,460,360




3,490,724



3,456,467


Average common shares outstanding

  - diluted


3,502,111



3,494,429



3,492,060



3,489,061



3,481,312




3,498,057



3,476,874







































































(Dollars in thousands, except per share data)

Three months ended,



Six months ended,


For the period:

6/30/19


3/31/19


12/31/18


9/30/18


6/30/18



6/30/19


6/30/18
















































Selected Ratios:























Return on average assets


1.05

%


1.15

%


0.78

%


1.07

%


0.98

%



1.10

%


1.00

%

Return on average shareholders' equity


10.91

%


12.09

%


8.29

%


11.64

%


10.70

%



11.49

%


11.02

%

Net interest margin (tax equivalent)


3.20

%


3.18

%


3.11

%


3.06

%


3.15

%



3.19

%


3.18

%

Efficiency ratio (tax equivalent)


61.97

%


59.28

%


74.03

%


57.31

%


63.08

%



60.61

%


62.27

%

Average shareholders' equity to total

   average assets


9.61

%


9.54

%


9.38

%


9.20

%


9.20

%



9.58

%


9.10

%

Net loan charge-offs (recoveries)

$

1


$

44


$

(2)


$

115


$

32



$

45


$

24


Net loan charge-offs (recoveries) -

   annualized / Average loans excluding

   held-for-sale


0.00

%


0.02

%


0.00

%


0.06

%


0.02

%



0.01

%


0.01

%















































Balance Sheet (Average)























Assets

$

1,202,406


$

1,187,374


$

1,186,456


$

1,190,132


$

1,166,383



$

1,194,932


$

1,165,356


Investment securities (Trading, AFS &  HTM, Equities)


357,836



360,640



366,469



368,807



372,850




359,231



378,055


Loans receivable


805,538



789,737



784,372



780,221



757,451




797,681



750,828


Deposits


1,021,925



1,008,060



1,018,141



1,023,227



987,000




1,015,031



985,333


Shareholders' equity


115,551



113,304



111,312



109,433



107,301




114,434



106,073


 

 

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SOURCE QNB Corp.