EX-99 2 qnbc-ex99_1.htm EX-99.1 EX-99

Ex 99.1

img160341895_0.jpg 

PO Box 9005

Quakertown, PA 18951-9005

215.538.5600

800.491.9070

QNBBank.com

 

 

FOR IMMEDIATE RELEASE

 

 

QNB CORP. REPORTS

EARNINGS FOR FIRST QUARTER 2023

 

 

QUAKERTOWN, PA (April 25, 2023) 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 2023 of $4,118,000, or $1.15 per share on a diluted basis. This compares to net income of $3,710,000, or $1.04 per share on a diluted basis, for the same period in 2022.

 

For the quarter ended March 31, 2023, the annualized rate of return on average assets and average shareholders’ equity was 0.97% and 10.81%, respectively, compared with 0.90% and 10.60%, respectively, for the first quarter 2022.

 

The operating performance of the Bank, a wholly-owned subsidiary of QNB Corp., improved for the quarter ended March 31, 2023, in comparison with the same period in 2022 due to a reversal of $1,783,000 in the provision for credit losses on loans. The change in contribution from QNB Corp. for the quarter ended March 31, 2023, compared with the same period in 2022, 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,

 

 

 

 

 

3/31/2023

 

 

3/31/2022

 

 

Variance

 

QNB Bank

$

4,287,000

 

 

$

3,708,000

 

 

$

579,000

 

QNB Corp

 

(169,000

)

 

 

2,000

 

 

 

(171,000

)

Consolidated net income

$

4,118,000

 

 

$

3,710,000

 

 

$

408,000

 

 

Total assets as of March 31, 2023 were $1,626,499,000 compared with $1,668,497,000 at December 31, 2022. Total available-for-sale debt securities decreased $8,621,000, or 1.6%, to $537,904,000, due primarily to sales of $9,081,000. Loans receivable declined $27,429,000 to approximately $1,011,956,000, or 2.6%. Total deposits increased $6,221,000 to $1,424,590,000. Short-term borrowing declined $51,135,000, or 31.7%.

“Our quarterly earnings were boosted by continued improvement in asset quality and a reversal in our provision for loan losses,” stated David W. Freeman, President, and Chief Executive Officer. Freeman continued, “Changes in the economic environment are evident in our first-quarter results, with a slight decline in loan demand and a rapidly increased rate environment leading to market demand for higher

 

rates on deposits. We are navigating the changing economic and rate environment with discipline, ensuring we remain competitive and an attractive banking option for our customers and prospects.”

Net Interest Income and Net Interest Margin

Net interest income for the quarter ended March 31, 2023 totaled $10,417,000, a decrease of $319,000 from the same period in 2022. Net interest margin was 2.55% for the first quarter of 2023 and 2.71% for the same period in 2022.

 

The yield on earning assets was 3.77% for the first quarter 2023 compared with 2.97% in the first quarter of 2022. The cost of interest-bearing liabilities was 1.53% for the quarter compared with 0.34% for the same period in 2022.

 

Proceeds from average short-term borrowings over the past year were invested in loans. Loan growth was primarily in commercial real estate, which comprised 41% of average earning assets in the three months of 2023 compared with 37% for the same period in 2022 and was the major contributor to the 48 basis-point increase in the yield on loans. The decline in the available-for-sale portfolio was primarily in mortgage-backed securities, which comprised 25% of average earnings assets in the three months of 2023 compared with 28% for the same period in 2022. The 104 basis-point increase in the rate paid on deposits and the 266 basis-point increase in the rate on short-term borrowing increased the cost of funds by 119 basis points contributing to the decrease in net interest margin.

 

Asset Quality, Provision for Credit Losses on Loans and Allowance for Credit Losses

QNB adopted ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326) (CECL) effective January 1, 2023. QNB recorded a decrease to its allowance for loan losses of $1,089,000 and an increased to its reserve for unused commitments of $5,000. The impact of this CECL adjustment, net of deferred taxes, of $857,000 was added to shareholders' equity.


QNB reversed $1,783,000 in provision for credit losses on loans in the first quarter of 2023 compared to no provision in the first of quarter 2022. QNB's allowance for credit losses on loans of $8,191,000 represents 0.81% of loans receivable at March 31, 2023, compared to $9,442,000, or 0.91% of loans receivable upon the adoption of CECL on January 1, 2023. QNB received $259,000 in payments on non-performing loans during the first quarter of 2023. Net loan recoveries were $532,000 for the quarter, compared with recoveries of $47,000 for the same period in 2022, primarily due to one large commercial customer. Annualized net loan recoveries for the quarters ended March 31, 2023 and March 31, 2022 were 0.21% and 0.02% 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 $8,805,000, or 0.87% of loans receivable at March 31, 2023, compared with $9,121,000, or 0.88% of loans receivable at December 31, 2022, and $11,647,000, or 1.26% of loans receivable at March 31, 2022. In cases where there is a collateral shortfall on non-accrual 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, 2023, $4,335,000, or approximately 95% 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 $13,621,000 at March 31, 2023, compared with $13,684,000 at December 31, 2022, and $19,072,000 at March 31, 2022.

Non-Interest Income

Total non-interest income was $1,219,000 for the first quarter of 2023 compared with $1,611,000 for the same period in 2022. There was a net realized loss of $465,000 on the sale of investments for the quarter ended March 31, 2023 compared with a gain of $36,000 for the same period in 2022. Unrealized net gain on the investment equity securities was $57,000 for the quarter ended March 31, 2023 compared to a net loss of $8,000 for the same period in 2022. The equities portfolio comprises blue-chip large-capitalized stocks, providing a taxable equivalent dividend yield of 3.39%.

 

Fees for services to customers increased $18,000 to $402,000 for the first quarter 2023 compared with the same period in 2022, due primarily to increased overdraft occurrences. ATM and debit card income increased $18,000 to $659,000 for the same period, due to card usage when comparing the two periods. Retail brokerage and advisory income increased $29,000 to $234,000 attributable to increased fees from annuity sales.

 

Net gain on sales of loans increased $6,000 when comparing the first quarter of 2023 with the same period in 2022, as there was an increase in mortgage originations when comparing the periods. Other non-interest income decreased $27,000 when comparing the two periods due primarily to reduced title company income of $19,000 and mortgage servicing fees of $11,000.

 

Non-Interest Expense

Total non-interest expense was $8,178,000 for the first quarter of 2023 compared with $7,813,000 for the same period in 2022. Salaries and benefits expense increased $297,000, or 7.0%, to $4,563,000 when comparing the two quarters. Salary expense and related payroll taxes increased $361,000, to $3,967,000 during the first quarter 2023 compared to the same period in 2022. Benefits expense decreased $64,000, when comparing the two periods.

 

Net occupancy and furniture and equipment expense increased $112,000, to $1,377,000 for the first quarter 2023 due to software maintenance costs.

 

Other non-interest expense decreased $44,000 when comparing first quarter 2023 with the same period in 2022 due to a $148,000 decrease in Bank shares tax and a $58,000 decrease in third-party services, partly offset by a $144,000 increase in deposit-related charge-offs primarily related to fraud.

 

Provision for income taxes increased $299,000 to $1,123,000 in the first quarter 2023 due to increased pre-tax income and a higher effective tax rate, compared with the same period in 2022. The effective tax rates for the quarter ended March 31, 2023 were 21.4% compared with 18.2% and for the same period in 2022.

 

 

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 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, 2022. 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.

 

Contacts:

David W. Freeman

Jeffrey Lehocky

 

President & Chief Executive Officer

Chief Financial Officer

 

215-538-5600 x-5619

215-538-5600 x-5716

 

dfreeman@qnbbank.com

jlehocky@qnbbank.com

 

 

QNB Corp.

 

Consolidated Selected Financial Data (unaudited)

 

(Dollars in thousands)

 

 

 

 

 

 

 

 

 

 

Balance Sheet (Period End)

3/31/23

 

12/31/22

 

9/30/22

 

6/30/22

 

3/31/22

 

Assets

$

1,626,499

 

$

1,668,497

 

$

1,645,068

 

$

1,646,695

 

$

1,647,986

 

Cash and cash equivalents

 

14,201

 

 

15,899

 

 

17,218

 

 

17,094

 

 

13,260

 

Investment securities

 

 

 

 

 

 

 

 

 

 

Debt securities, AFS

 

537,904

 

 

546,525

 

 

555,710

 

 

609,567

 

 

656,846

 

Equity securities

 

11,908

 

 

12,056

 

 

10,444

 

 

11,617

 

 

12,652

 

Loans held-for-sale

 

388

 

 

-

 

 

-

 

 

-

 

 

-

 

Loans receivable

 

1,011,956

 

 

1,039,385

 

 

1,008,306

 

 

963,414

 

 

926,369

 

Allowance for loan losses

 

(8,191

)

 

(10,531

)

 

(11,338

)

 

(11,297

)

 

(11,231

)

Net loans

 

1,003,765

 

 

1,028,854

 

 

996,968

 

 

952,117

 

 

915,138

 

Deposits

 

1,424,590

 

 

1,418,369

 

 

1,476,668

 

 

1,467,728

 

 

1,451,753

 

Demand, non-interest bearing

 

212,259

 

 

231,849

 

 

236,167

 

 

240,281

 

 

242,024

 

Interest-bearing demand, money market and savings

 

962,315

 

 

1,011,071

 

 

1,065,472

 

 

1,065,638

 

 

1,046,074

 

Time

 

250,016

 

 

175,449

 

 

175,029

 

 

161,809

 

 

163,655

 

Short-term borrowings

 

110,192

 

 

161,327

 

 

92,896

 

 

77,836

 

 

76,738

 

Long-term debt

 

-

 

 

10,000

 

 

10,000

 

 

10,000

 

 

10,000

 

Shareholders' equity

 

83,874

 

 

70,958

 

 

58,124

 

 

83,738

 

 

102,498

 

 

 

 

 

 

 

 

 

 

 

 

Asset Quality Data (Period End)

 

 

 

 

 

 

 

 

 

 

Non-accrual loans

$

4,561

 

$

4,820

 

$

6,337

 

$

7,085

 

$

7,272

 

Loans past due 90 days or more and still accruing

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

Restructured loans

 

4,244

 

 

4,301

 

 

4,357

 

 

4,309

 

 

4,375

 

Non-performing loans

 

8,805

 

 

9,121

 

 

10,694

 

 

11,394

 

 

11,647

 

Other real estate owned and repossessed assets

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

Non-performing assets

$

8,805

 

$

9,121

 

$

10,694

 

$

11,394

 

$

11,647

 

 

 

 

 

 

 

 

 

 

 

 

Allowance for loan losses

$

8,191

 

$

10,531

 

$

11,338

 

$

11,297

 

$

11,231

 

 

 

 

 

 

 

 

 

 

 

 

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

 

0.87

%

 

0.88

%

 

1.06

%

 

1.18

%

 

1.26

%

Non-performing assets / Assets

 

0.54

%

 

0.55

%

 

0.65

%

 

0.69

%

 

0.71

%

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

 

0.81

%

 

1.01

%

 

1.12

%

 

1.17

%

 

1.21

%

 

 

 

QNB Corp.

Consolidated Selected Financial Data (unaudited)

(Dollars in thousands, except per share data)

Three months ended,

For the period:

3/31/23

12/31/22

9/30/22

6/30/22

3/31/22

Interest income

$15,463

$14,739

$13,546

$12,327

$11,809

Interest expense

5,046

3,460

2,167

1,224

1,073

Net interest income

10,417

11,279

11,379

11,103

10,736

Provision for credit losses

(1,805)

(850)

-

-

-

Net interest income after provision for credit losses

12,222

12,129

11,379

11,103

10,736

Non-interest income:

 

 

 

Fees for services to customers

402

404

423

403

384

ATM and debit card

659

704

669

705

641

Retail brokerage and advisory income

234

184

194

205

205

Net realized gain on investment securities

(465)

(227)

-

457

36

Unrealized gain (loss) on equity securities

57

1,602

(1,174)

(1,446)

(8)

Net gain on sale of loans

6

-

6

-

-

Other

326

330

366

315

353

Total non-interest income

1,219

2,997

484

639

1,611

Non-interest expense:

 

 

 

Salaries and employee benefits

4,563

4,464

4,371

4,205

4,266

Net occupancy and furniture and equipment

1,377

1,259

1,314

1,274

1,265

Other

2,260

2,396

2,129

2,267

2,282

Total non-interest expense

8,200

8,119

7,814

7,746

7,813

Income before income taxes

5,241

7,007

4,049

3,996

4,534

Provision for income taxes

1,123

1,560

634

647

824

Net income

$4,118

$5,447

$3,415

$3,349

$3,710

 

 

 

 

 

 

Share and Per Share Data:

 

 

 

 

 

Net income - basic

$1.15

$1.52

$0.96

$0.94

$1.04

Net income - diluted

$1.15

$1.53

$0.96

$0.94

$1.04

Book value

$23.32

$19.78

$16.25

$23.47

$28.81

Cash dividends

$0.37

$0.36

$0.36

$0.36

$0.36

Average common shares outstanding -basic

3,588,363

3,577,587

3,567,987

3,559,185

3,552,854

Average common shares outstanding -diluted

3,588,363

3,567,987

3,559,185

3,554,456

3,550,542

 

 

 

 

 

 

QNB Corp.

Consolidated Selected Financial Data (unaudited)

(Dollars in thousands, except per share data)

Three months ended,

For the period:

3/31/23

12/31/22

9/30/22

6/30/22

3/31/22

Selected Ratios:

 

 

 

 

 

Return on average assets

0.97%

1.24%

0.78%

0.79%

0.90%

Return on average shareholders' equity

10.81%

14.38%

9.20%

9.28%

10.60%

Net interest margin (tax equivalent)

2.55%

2.68%

2.72%

2.73%

2.71%

Efficiency ratio (tax equivalent)

69.39%

56.20%

64.88%

64.98%

62.35%

Average shareholders' equity to total
   average assets

8.99%

8.65%

8.53%

8.43%

8.53%

Net loan charge-offs (recoveries)

$(532)

$(43)

$(41)

$(66)

$(47)

Net loan charge-offs (recoveries) - annualized / Average loans excluding held-for-sale

-0.21%

-0.02%

-0.02%

-0.03%

-0.02%

Balance Sheet (Average)

 

 

 

 

 

Assets

$1,719,167

$1,737,679

$1,727,132

$1,700,600

$1,675,385

Investment securities (AFS & Equities)

649,231

673,117

691,010

710,856

710,109

Loans receivable

1,021,265

1,020,102

984,968

944,773

918,602

Deposits

1,414,764

1,462,654

1,475,668

1,458,921

1,444,049

Shareholders' equity

154,503

150,281

147,296

144,688

141,986

 

 

QNB Corp. (Consolidated)

 

 

 

 

 

 

 

Average Balances, Rate, and Interest Income and Expense Summary (Tax-Equivalent Basis)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

March 31, 2023

 

March 31, 2022

 

Average

Average

 

 

Average

Average

 

 

Balance

Rate

Interest

 

Balance

Rate

Interest

Assets

 

 

 

 

 

 

 

Investment securities:

 

 

 

 

 

 

 

   U.S. Treasury

$269

1.49%

$1

 

$89

0.74%

$-

   U.S. Government agencies

101,943

1.11

283

 

99,979

1.08

270

   State and municipal

111,150

2.23

621

 

129,790

2.41

781

   Mortgage-backed and CMOs

417,137

1.62

1,685

 

461,137

1.49

1,718

   Corporate debt securities

6,636

4.40

73

 

6,700

4.34

73

   Equities

12,096

3.39

101

 

12,414

3.20

98

     Total investment securities

649,231

1.70

2,764

 

710,109

1.66

2,940

Loans:

 

 

 

 

 

 

 

  Commercial real estate

681,615

4.52

7,602

 

579,661

4.04

5,957

  Residential real estate

105,698

3.55

937

 

101,431

3.23

818

  Home equity loans

56,645

6.23

870

 

54,618

3.36

453

  Commercial and industrial

152,756

8.22

3,096

 

140,588

4.57

1,585

  Consumer loans

4,089

6.73

68

 

4,735

5.05

59

  Tax-exempt loans

20,591

3.49

177

 

19,569

3.41

165

     Total loans, net of unearned income*

1,021,394

5.06

12,750

 

900,602

3.99

9,037

Other earning assets

7,001

5.71

99

 

6,689

0.97

16

     Total earning assets

1,677,626

3.77

15,613

 

1,617,400

2.97

11,993

Cash and due from banks

12,881

 

 

 

13,082

 

 

Allowance for loan losses

(9,937)

 

 

 

(11,204)

 

 

Other assets

38,597

 

 

 

38,107

 

 

     Total assets

$1,719,167

 

 

 

$1,657,385

 

 

 

 

 

 

 

 

 

 

Liabilities and Shareholders' Equity

 

 

 

 

 

 

 

Interest-bearing deposits:

 

 

 

 

 

 

 

  Interest-bearing demand

$317,615

0.39

302

 

$338,296

0.18

146

  Municipals

111,954

3.89

1,075

 

116,516

0.32

91

  Money market

130,627

1.06

342

 

141,296

0.30

106

  Savings

406,072

1.08

1,077

 

437,645

0.30

321

  Time < $100

101,208

1.53

382

 

92,692

0.80

184

  Time $100 through $250

97,617

3.02

727

 

48,537

0.71

85

  Time > $250

27,723

1.80

123

 

24,970

0.69

42

     Total interest-bearing deposits

1,192,816

1.37

4,028

 

1,199,952

0.33

975

Short-term borrowings

134,918

2.99

995

 

71,480

0.33

59

Long-term debt

5,833

1.57

23

 

10,000

1.57

39

     Total interest-bearing liabilities

1,333,567

1.53

5,046

 

1,281,432

0.34

1,073

Non-interest-bearing deposits

221,948

 

 

 

244,097

 

 

Other liabilities

9,149

 

 

 

7,870

 

 

Shareholders' equity

154,503

 

 

 

141,986

 

 

    Total liabilities and

 

 

 

 

 

 

 

       shareholders' equity

$1,719,167

 

 

 

$1,675,385

 

 

Net interest rate spread

 

2.24%

 

 

 

2.63%

 

Margin/net interest income

 

2.55%

$10,567

 

 

2.71%

$10,920

Tax-exempt securities and loans were adjusted to a tax-equivalent basis and are based on the Federal corporate tax rate of 21%

Non-accrual loans and investment securities are included in earning assets.

* Includes loans held-for-sale